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Full text of "Zimmermann on ocean shipping"

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Cornell University Library 
KF 2605.Z73 1923 



Zlmmermann on ocean shipping / 




3 1924 018 727 317 




The original of tliis book is in 
tine Cornell University Library. 

There are no known copyright restrictions in 
the United States on the use of the text. 



http://www.archive.org/details/cu31924018727317 



ZIMMERMANN ON 

OCEAN SHIPPING 



BY 

ERICH W. ZIMMERMANN, Ph.D. 

ASSOCIATE PROFESSOR 

OF ECONOMICS, UNIVERSITY OF 

NORTH CAROLINA 




8* NEW YORK 

S PRENTICE-HALL, INC. 

I 1923 



Copyright, 1921, by 
PRENTICE-HALL. Inc. 



All Rights Reserved 



To My Wife 

in appreciation of her devoted and unselfish assistance in the 
preparation of this volume. 



PREFACE 



A GREAT poet-philosopher said : 

"What you inherit from your fathers, 
Is not your own until you make it so." 

This is true of nations as well as of individuals. The War 
has left America a large fleet of merchant ships — a rich 
inheritance. Now America faces the task of making these 
ships her own, of assimilating them, of turning them into a 
great national asset — a glorious merchant marine. To ac- 
complish this, a whole nation, too long one-sidedly absorbed 
in its interior developments, must turn its face from moun- 
tains and prairies to the sea. A whole people must become 
"ship-minded." The hope of contributing his little share to 
this big end has inspired the writer throughout his task. 

Others have heard the call. Men of the caliber of Edward 
N. Hurley and Robert E. Annin — to mention but two 
prominent names among recent writers on the subject of 
' Ocean Shipping — are devoting time and energy toward 
spreading light on the subject. Big financial institutions like 
the Bankers Trust Company are appropriating large sums 
toward the same end. Organizations such as the National 
Marine League and the National Merchant Marine Asso- 
ciation are working with redoubled vigor. 

Under these circumstances, a new book which should be 
not only an addition, but a contribution, must possess dis- 
tinct characteristics establishing its raison d'etre. What 
impresses upon this book the stamp of individuality is the 
emphasis placed upon the interdependence of shipping and 



vi PREFACE 

commerce. The carrier lives for and on the cargo. The 
origin, destination and character of the cargo determine the 
route and type of the carrier. The functions and features 
of world shipping are understood only when placed against 
the background of ocean commerce. 

Besides, the march of events in these after-war days is 
so rapid that an up.-to-date book is bound to contain a 
wealth of new material, sufficient in itself to warrant its 
appearance. 

It is hoped that the book will prove valuable both as a 
college text and as a handbook for business men. 

Erich W. Zimmeemann. 

May, 1921. 



CONTENTS 



PART I. THE OCEAN 

I. The Nature of Ocean Transportation . . 3 

Early history — Economic significance of ocean transpor- 
tation — Cheapness of water transportation — Reasons for 
cheapness : buoyancy — Additional causes for cheap water 
transportation — Ocean haul longer than land haul — 
Ocean transportation requires less fixed capital — History 
of freedom of the seas — Essentials of economically free 
seas — British liberal policy explained — Freedom never 
complete; cabotage reserved to nationals — other restric- 
tions — Neo-Mercantile tendencies of to-day — Freedom of 
the seas inseparable from freedom of international trade — 
Petroleum a case in point — Bernard N. Baker's idea of 
the freedom of the seas — The fuel situation. 

II. O.CEAN Routes 20 

The nature of ocean routes — The North-Atlantic lanes — 
Flexibility of ocean routes — Definition of an ocean 
route — Latitudinal character of present world trade — 
The coming significance of the tropics — The load index 
— Shipping Board statistics of ocean routes — Trade 
routes of the British Empire — Triangular voyages — Fuel 
cost and other expense items aflfect profitableness of 
routes — ^Great Circle route — Political aspects of ocean 
routes — Planetary winds and sailing routes — Winds af- 
fect steamer routes — Proper routing of world tonnage 
means great saving — The war has changed wprld trade 
routes — Shipping Board routes — New lanes of world 
commerce. 

III. Suez and Panama 44 

Isthmian canals as milestones of progress— Early history 

of Suez Canal — Important happenings in the Canal's his- 
tory — Commercial significance of the Suez Canal — Com- 
petition between Suez Canal and Cape route-r-Early his- 
tory of Panama Canal — The United States completes the 
Canal — Suez and Panama compared— War cripples early 
traffic through Panama Canal — Panama Canal tolls— Eco- 
nomic significance of Panama Canal— The "Twilight 
vii 



CONTENTS 

Zone" served by both Suez and Panama— Reduction of 
distance means trade expansion — Shorter distances means 
larger tonnage supply — The "dawn of the Pacific age." 



PART II. PORTS AND TERMINALS 

IV. Ocean Terminals 65 

Good terminals indispensable to efficient transportation — 
Port terminology — Different types of harbors — Rivers 
and tides — Functions of ports — Importance of physical 
contact between rail and ship — ^Harbor depth and draft 
of vessels— Other important physical requirements of 
ports— Bush Terminal, an ideal industrial port— Func- 
tions of the Bush Terminal Company — Store-door de- 
livery. 

V. Entrepot Centres and Free Ports .... 82 

Nature of entrepot trade — History of entrepot trade — 
Volume of entrepot trade of different countries — Rela- 
tive decline and diffusion of entrepot trade — London's 
benefits derived from entrepot trade — Reasons for Lon- 
don's predominance — Applying European lessons to this 
country — History of Free Ports — Arguments against 
Free Zones — Advantages of Free Zones. 

VI. The World's Leading Ports, With Special 

Reference to the Port Situation in the 
United States 97 

Difficulty of comparative statistics — The principal ports 
of the world — Types of ports — A comparison of London 
and Liverpool — ^Weight statistics — General aspects of the 
port_ situation in the United States — New York's pre- 
dominance — History of New York's ascendency — The 
port differential rate situation — War-time readjustment 
of railroad rates. 



PART III. THE OCEAN CARRIER 

VII. Size, Speed and Efficiency . . . . . 117 

Rapid growth in the size of vessels during the nineteenth 
century — Economic justification of large size — .Advantages 
accruing from large size — Large vessels few but con- 
spicuous — Large vessels represent highest achievement — 



CONTENTS ix 

Limitations upon further growth of steamers — Large 
vessels necessitate big terminal outlay — Large size 
handicaps vessel operation — Increase in speed costly — The 
race for the "Blue Ribbon of the Ocean" — Increasing 
efficiency of fuel — Steamship efficiency — Port delays 
neutralize gains in efficiency. 

VIII. Motive Power: Wind, Steam and Internal 

Combustion 133 

The Romance of the sailing vessel— Sail tonnage under 
American flag — Classification of sailing craft — Evolution 
of the sailing vessel — The clipper ship — Sailing vessel 
and steamship compared — The future of the sailer — Im- 
provements in steamship construction — Evolution of the 
marine engine — The coming of the turbine — Electricity's 
part in ship propulsion — The motor ship — American ex- 
perience with Diesel-driven ships — Oil more efficient than 
coal'— Advantages of the motor ship. 

IX. Recent Tendencies in the Development of 

THE Carrier 152 

War emergency prompts invention — The economic back- 
ground of the standardized ship — Mr. Redfield proposes 
ship standardization — Engineering aspects of standardized 
ship construction — English psychology against standardi- 
zation — Fabricating methods explained by Mr. H. R. 
Sutphen — Many modifications and innovations necessary — 
Rail transportation of parts affects construction — The 
whole nation contributes to the work of the fabricating 
yards-7-The record of the fabricated ship — Drawbacks of 
ship fabrication — The rivetless ship — The Isherwood 
system — The Denman-Goethals controversy — The con- 
crete ship — Advantages of the concrete ship — The record 
of the "Faith" — Classification of the concrete ship- 
Special vessel types — The evolution of the tanker — Dif- 
ficulties of bulk transportation — Tank tonnage grows 
rapidly^ — Drawbacks of tank vessels — Coal and ore vessels 
— Refrigerator ships. 

X. The Bunkering Problem •177 

The United States leads in the use of oil as marine fuel — 
War causes transition from coal to oil — American eman- 
cipation from British fuel control — British coal shortage 
— ^Rapid growth of oil-burning merchaiit fleet — The 



X CONTENTS 

"A.G.W.I." a conspicuous example — Great Britain a 
close second in ship use of oil — ^Advantages of oil over 
coal — Oil saves space — Oil reduces crew requirements — 
Oil gives better speed results — Oil extends cruising radius 
— ^A network of oil-bunkering stations encircles the globe 
— The Royal Dutch-Shell petroleum combination — The 
world's tank fleet — The essentials of world petroleum 
production — Phenomenal increase in the demand for oil — 
Shipping adds greatly to this demand — The world's 

petroleum reserves Indusfrfes put on oil basis-^ 

Possible substitutes for petroleum — America's future as 
a maritime nation requires our participation in world oil 
exploitation. 

PART IV. THE CARGO 

XL Cargo and Carrying Capacity 207 

Weight of world's sea-borne trade — Comparison with 
other weight statistics — Weight of sea-borne Trade by 
countries — Tonnage required to haul sea-borne trade — 
Elements of ship measurement — Displacement tonnage — 
Deadweight carrying capacity — Registered tonnage — 
Gross and net registered tonnage — Various tonnage cal- 
culations — Cargo, weight, and measurement tons — Gen- 
eral classification of commodities — Tables of unit dis- 
placement of commodities — Stowage factors of some im- 
portant commodities. 

XII. Coal — the Key to the Carrying Trade . . 223 
Coal a comer-stone of British maritime supremacy — 
British appreciation of the economic significance of coal 
exports — England's natural advantages as a coal export- 
ing country — England's merchant marine the greatest 
consumer of bunker coal — Growth of British coal exports 
— Geographical distribution of British coal exports — 
Distant markets emancipated from British coal supply — 
German competition — American competition — Growth of 
American coal exports — Doubtful value of part of pres- 
ent coal export business^-Distribution of American coal 
exports — Economic value of British and American coal 
exports compared — British coal Europe's greatest return 
cargo — Nature of American exports — Future competition 
between England and America. 



CONTENTS xi 

XIII. Cargo Handling and Stowage .... 244 
Reasons for American neglect of seaport equipment — Re- 
cent changes in the situation — The effect of American 
vessel-ownership on the need of cargo handling equip- 
ment — The Seamen's Law accentuates this necessity — 
Opposition to mechanical installations — Economy sought 

by mechanical handling — Different cargoes require dif- 
ferent handling devices — Handling movements analyzed 
— Miscellaneous cargo offers greatest difficulty — Loading 
and unloading through side openings — Methods adapted 
to ocean-going vessels — The work of the ship's tackle — 
The equipment on land — Late adoption of cranes ex- 
plained — Cranes do not always pay — Types of cranes — 
Economies effected by cranes— Handling standard-pack- 
age freight — American efficiency in handling bulk com- 
modities — Loading coal and grain — Agencies in loading 
ships — The problem of stowing. 

PART V. SHIPPING SERVICES 

XIV. Steamship Services and Vessel Types . . 271 

Classification of carriers on the basis of service — Tramps 
and liners ; their numefical relation — Service of tramp 
and liner compared — Peculiarities of tramp construction 
— British predominance in tramp shipping' — ^What tramps 
carry — Ek;onomies of the tramp — The tramp losing 
ground — The cargo liner — Special types of cargo 
steamers — Profit-earning capacity of cargo liners — A 
typical modem cargo liner. 

XV. Papers and Documents 286 

Importance of charter party— Trip and time charter — Im- 
portant clauses explained — Terms used in the charter 
business — Cotton charters — The "Pixpinus"— Grain char- 
ters — The meaning of "range"— Example of a grain 
charter— Peculiarities of the fruit trade— Papers used in 

the line business— The indent— The shipping permit— 
The dock receipt— The bill of lading— "Straight" and 
"order" bills of lading— Shipper's export declaration- 
Shipper's manifest— Consular invoices and other docu- 
ments — Ship's papers. 

XVI. Passenger Service 320 

Significance of liner tonnage— History of ocean travel 
and emigration— The effect of the war on tonnage supply 
The present construction program of leading companies 



xii CONTENTS 

— Ocean passenger service originally a by-product of 
freight service — Load index affects profitableness — Evo- 
lution of the express steamer — Different policies pursued 
by different companies — "Safety first" is slogan — Com- 
fort of modern liners— The floating town. 

XVII. Mail and Express Service 332 

Prerequisites of mail and express service — ^Volume of 
mail traffic — "Consignee's mail" — Principles governing 
classification of mail — Different methods of paying for 
ocean mail service — Mail contracts under Law of 1891 — 
Basing payment on amount of postage — Policies of the 
United States Post Office Department — Sea post-offices 
— International parcel-post — England's excellent parcel- 
post connections— ^Atilerican mail-order houses handi- 
capped — Deficiencies of American system — Growth of 
American parcel-post shipments abroad — International 
express business. 



PART VI. MARINE INSURANCE 

XVIII. Classification and Registry of Shipping 353 

Ship classification the basis of hull insurance — Beginning 
of Lloyd's — Shipbuilders abuse classification records — 
Mr. Plimsoll's load-line agitation creates a rival — The 
process of ship classification — The Annual Report of 
Lloyd's Register — History of the American Bureau of 
Shipping — Official recognition of the American Bureau — 
Cooperation with other agencies. 

'XIX. History and Organization of Marine In- 
surance : 363 

Importance of Marine Insurance — Economic services 
rendered by marine insurance — Early beginnings of 
marine insurance — The Rolls of Oleron — Marine Insur- 
ance compared with Transportation Insurance — Carrier's 
liability under the Harter Act — Contractual provisions of 
the bill of lading — Organization of marine insurance 
business — Lloyd's business methods — Lloyd's information 
service — America favors company plan — Extent of 
foreign control over American marine insurance — Re- 
awakening of American marine insurance — Recommenda- 
tions of the House Committee on Merchant Marine and 
Fisheries — American insurance pools — Reaction of Ameri- 
canization process on British interests — Self insurance — 
Reinsurance; definition and general purpose. 



CONTENTS xiii 

XX. Elements of Marine Insurance Practice . 389 

Insurable interests and some important risks — Special 
Risks — Meaning of "all other perils" — Different , losses- 
Average adjustment — Factors affecting insurance rates'— 
Rate-making in marine insurance differs from other in- 
demnity calculations — Application for marine insurance 
— Types of insurance policies — Insurance certificates- 
Legal intricacies of insurance policy — Terms and clauses 
explained. '' 



PART VII. ORGANIZATION AND MANAGEMENT 

XXI. The History of Vessel Ownership and 

Management 405 

Shipping trade in Mercantilist days — Free traders versus 
chartered companies — Smuggling, trafficking and Piracy 
— Functional division between shipping and trading — ^The 
Origin of berth and charter traffic — Timoud beginnings 
of line development — The Early "Packets" — The History 
of modern steamship lines — Development of berth traffic 
— The appearance, of the tramp — The revival of the 
private carrier — Summary of evolution. 

XXII. Organization of the Steamship Business 419 

Three types of steamship organization — Liner organiza- 
tion — General features not unusual — The manager of 
operations and his department — The traffic man-r-Organi- 
zation of the traffic department — Passenger traffic de- 
partment — The organization of the tramp business — 
Organization of the charter market — Negotiating a char- 
ter — Methods of tramp operation — General steamship 
agents — Ship brokerage — Former functions of super- 
cargoes — Duties of supercargoes on Shipping Board 
vessels — Reasons for failure. 

XXIII. Concentration and Combination . ^ . 434 
Aim of combination— Forces driving shipping to greater 
concentration— Growth of the single line— The "port- 
manteau company"— The "group"— The most important 
"groups" in British shipping— The Holding company-- 

The "I. M. M."— An anomalous situation— The Harn- 
man Combine — American Ship and Commerce Corpora- 
tion The "A- G. W. I." — Horizontal and vertical com- 
bination contrasted— Examples of shipyard control — 
Shipping assures fuel supply— Shipping branches into 



xiv CONTENTS 

financial "enterprises — Shipping absorbed by producing 
interests — The case of the steel industry — Other ex- 
amples — Railroad control over steamship lines — Foreign 
railroad steamship lines. 

XXIV. Pools, Agreements and Conferences . . 455 

Network of agreements supplements combinations— Im- 
portant investigations — Absence of tramp organization — 
Effect of tramp competition on line organization — ^Liner 
co-operation more easily achieved — Costliness of rate 
■ wars — Purpose and scope of agreements — Conferences 
and Pools Contrasted — Various kinds of pools — Agree- 
ments with freight brokers — Percentage of freight 
handled — ^Agreements between steamship companies and 
railroads — Advantages of conferences — Stability of 
rates — Less discrimination — Sounder rate policy — Need 
of effective control — Disadvantages of conferences — 
Monopolistic tendencies — Deferred rebates — America 
forbids deferred rebates and the use of "Fighting 
Ships" — Difficulties of American shippers — Congress 
Endeavours to aid — America's attitude towards existing 
conferences — Our efforts appreciated — Regulated com- 
bination versus wild competition. 



PART VIII. RATES AND FINANCES 

XXV. Theory of Rate-Making 483 

Theory and practice of rate-making contrasted — Cost 
analysis of steamship operation — ^Vessel types and 
cost — Effect of age — Corporate finances and cost — Other 
factors influencing cost — How to calculate the profitable- 
ness of a service — The question of "laying up" — Traffic 
intensity — The significance of the load index — Statistical 
proof — Cost factor not generally felt — Competitive 
nature of ocean rates — Charging "what the traffic will 
bear'' — Absolute monopoly unlikely, therefore violent 
fluctuation of rates — Charter rates fluctuate most^ 
Effect of the war on rates — Effect of crops on rates. 

XXVI. Rate Practice and Rate Control . . . 502 

Negotiating charter rates — Complexity of Rates in 
general cargo — Undesirable to base rates on cost — 
Actual rate based on four considerations — Rate Policy 
and stowage plan — A practical application — "Small stow- 



CONTENTS XV 

age" and dunnage — Exceptional circumstances afifect 
rates — Rate contracts — Economic advantages of rate 
contracts — The question of rate discrimination — 
Methods of quoting freight rates — Origin of ocean 
tariffs — Nature of a tariff — Oldest ocean tariffs know 
principles underlying tariffs — Structure — "Scales" dis- 
regard value — A modern tariff — Freight classification — 
Rate control regulation of charter rates — Relations with 
the railroad administration — Rate function of the divi- 
sion of regulation and division of operation distinguished 
— Carriers' conferences and contracts — Tariffs checked 
and analyzed — Charter filing regulation. 

XXVII. The Finances of Shipping Companies . 540 

Unsteady character of steamship profits — Effect of 
fluctuating earnings on sales price of vessel — Book values 
and competition — Relation of stocks and bonds in ship- 
ping finance — Methods of acquiring capital — Wide distri- 
bution of British steamship securities holdings — Ameri- 
can methods — European Practice — Reforming the ship 
mortgage law — The experience of Great«Lakes Bankers 
— Income of American shipping 



PART IX. AMERICA'S MERCHANT MARINE 

XXVIII. History of the American Merchant 

Marine and Recent Legislation . . . 557 

Early growth — Development of shipping checked — The 
clipper-ship era and its subsequent decline — Vain efforts 
to revive American ocean-shipping — Awakening interest 
— New conditions caused by the European war — The Ship 
Purchase Bill— The Seamen's Law— Some important pro- 
visions of the Act. 

XXIX. The Work of the United States Ship- 
ping Board 568 

War problems displace peace conditions— Demand for 
ships — The question of government ownership and opera- 
tion—Creation of the Shipping Board— Organization of 
the Shipping Board— Ship construction; program and 
achievements— British and American shipbuilding records 
compared— The war's effect on world shipping— Shipping 
Board Finances— Agency yards- Hog Island; history 
and record— Expansion of American shipbuilding facili- 



xvi CONTENTS 

ties— The Shipping Board fleet— Problems of operation — 
Types of operating agreements — Recent changes — The 
Shipping Control Committee-^The Chartering Committee 
— Research work of the Division of Planning and Sta- 
tistics. 

XXX. The Merchant Marine Act of 1920 . . 593 

Significance of the Jones Act — General characteristics of 
the Law — Current opinion on new shipping law — De- 
tailed provisions of the Act ; sections 1 and 2 introductory 
— Section 3 creates new Shipping Board — The new sales 
policy — Criticism of this policy — Sale of Shipping Board 
vessels to aliens made very difficult — Nation-wide inquiry 
into traffic conditions authorized — Aid to shipbuilding — 
The Board may issue "Orders in Council" — Against "de- 
ferred rebates" and "fighting ships" — Extension of coast- 
wise laws — Tax-exemption for American shipowners — 
American mail for American ships — American Bureau 
of Shipping recognized — Preferential railroad rates for 
goods carried in American bottoms — This provision at- 
tacked and de?f ended — Encouragement for American 
marine insurance companies — Ship mortgage reform — 
Seamen's Law upheld — The question of tariff discrimina- 
tion — Historical aspects — The wisdom of discrimination 
— Legal aspects — Conclusion. 

Appendices 617 



PART I 
THE OCEAN 



CHAPTER I 

THE NATURE OF OCEAN TRANSPORTATION 

Early history. — "Navigare necesse" — navigate we must 
— was a Roman slogan which reveals the early signifi- 
cance of water transportation. But while the use of ships 
is as old as the ages, its beginnings reaching into pre- 
historic days, ocean navigation in its proper sense is an 
achievement of relatively recent times. If we disregard 
the isolated efforts of a few adventurers, ocean trans- 
portation is less than 500 years old. Not until the inven- 
tion of the compass and the astrolabe helped the early 
mariner to feel his way through the watery deserts, and 
not until a more seaworthy type of vessel than the Span- 
ish caravel or Venetian galley had been evolved, could the 
era of world shipping dawn upon the earth. Before that, 
shipping had confined itself to the use of streams — the 
potamic stage — or, if venturing upon the sea, had not 
dared to go out of sight of the coast — the thalassic stage. 

But when the spell was broken, the ocean, instead of 
being a barrier that "keeps lands apart," that serves na- 
tions "in the office of a moat," became a link binding dis- 
tant peoples together in commercial, intellectual and 
spiritual intercourse. This was bound to revolutionize 
the mental attitude as well as the political, social and 
economic life of mankind. 

Economic significance of ocean transportation. — To 
grasp the economic significance of ocean shipping we 
must understand the part that transportation in general 

3 



4 OCEAN SHIPPING 

plays in our life, and must consider the peculiarities that 
distinguish water, and, in particular, ocean transporta- 
tion from land transportation. 

To the economist who defines production as "the crea- 
tion of utilities," transportation is merely a phase of pro- 
duction. The ship, as the railway, is the servant of com- 
merce, and the function of commerce is — to use a phrase 
coined by J. J. Hill' — "to bring the goods from where they 
are to where they ought to be." To do so adds to their 
value; for the shift of place creates so-called place utili- 
ties, and, in most instances, also time utilities. 

So far there is no difference between land and water 
transportation. They serve the same purpose, but differ 
greatly in the efficiency and cost of the service they 
render. 

Cheapness of water transportation. — Generally speak- 
ing, water transportation is cheaper than land transporta- 
tion. When Vasco da Gama discovered the sea route to 
India around the Cape of Good Hope, he brought down- 
fall and decay to Venice and Genoa, the great mistresses 
of the Mediterranean Sea, and in their places he enthroned 
Portugal, Spain, Holland and England. Why? Because 
the life blood of the Mediterranean trade centres was the 
commerce with the Orient which travelled over the old 
caravan routes until it struck the Mediterranean. When 
opportunity offered to carry the same merchandise by 
water, though thousands of miles out of the way, the 
arteries of land transpprtation were bound to dry up, 
unable to compete with the cheaper water transportation. 
To come down to modern times, we reproduce the fol- 
lowing figures from Mulhall's Dictionary of Statistics.^ 

1 1899 Edition, p. 301. 



THE NATURE OF OCEAN TRANSPORTATION S 

These figures i-epresent the average cost (calculated for 
all countries) of transporting one ton of commodities 
over a distance of 1000 nautical miles : 

By ocean 5 shillings 

By canal 20 shillings 

By railroad 100 shillings 

By turnpike 300 shillings 

An extreme case, illustrating the cheapness of water 
transportation, was that of a London merchant who in 
1892 bought 200 tons of second-class flour in Liverpool. 
Sending it to London by rail was out of the question, 
although the London and Northwestern Railway rates 
for through carriage between the two places were so 
small as to do little more than pay the cost of move- 
ment'; and the local sea rate was such a trifle less than 
the land rate that it paid the buyer to ship the flour from 
Liverpool to New York, and then from New York direct 
to London, at through long-distance rates.* To be sure, 
other factors besides the intrinsic cheapness of water car- 
riage must have come into play to create this exceptional 
situation. It would be wrong to generalize from this spe- 
cific case. For in the course of time, improvements in 
the technique of transportation by land and water widen 
or shorten the spread between the respective costs of 
carrier per unit. 

Reasons for cheapness: buoyancy. — Among the rea- 
sons for the relative cheapness of water transportation, 
the physical property of water as compared with that of 
solid land is the most elementary and, at the same time, 
probably the most important. Experimentation has 

2 Lyde, Commercial Geography, pp. 44, 45. 



6 OCEAN SHIPPING 

shown that a horse which can draw a load of only one 
ton on a two-wheeled cart can draw a load of forty tons 
on a barge. The explanation is this; the water itself 
bears the burden so that only motive power is needed, 
while on land an additional amount of power has to be 
supplied to overcome friction due to weight. To be sure, 
science has reduced this friction to a minimum by the usie 
of steel rails, ball bearings; lubricants, etc. If we, there- 
fore, compare a modern railroad train with a modern 
steamship, we find that the relative efficiency of the lat- 
ter is by no means forty times the efficiency of the train. 
A scientific comparison of these two most important 
means of transportation of the present age is rendered 
problematic by the iriodifications necessitated by storms 
and currents, etc., on the one hand, and grades and 
curves, etc., on the other. The fuel consumption reflects 
the consumption of energy. _Statistics tell us that during 
1916 the railroads of the United Stated consumed 0.066 
pounds of fuel per ton mile while lake carriers consumed 
only 0.029. Corresponding figures for ocean carriers would 
be interesting but they do not seem to be available. 

Additional causes for cheap water transportation. — 
This difference in efficiency, however, is partly due to 
other causes besides the difference in the physical prop- 
erties of the two elements, water and land. In the first 
place, the locomotive designer is handicapped as com- 
pared with the builder of marine engines, because the 
dimensions of the engines are limited by the gauge of 
the track, the width of the tunnels, the strength of the 
bridges, the angle of curves, etc. In a similar way the 
manufacturer of railroad cars labors under difficulties as 
compared with the shipbuilder. The necessity of break- 



THE NATURE OF OCEAN TRANSPORTATION 1 

ing up the space, which represents the carrying capacity 
of the train, into many independent units increases the 
deadweight or the tare far beyond the point with which 
a shipbuilder has to reckon. Here again the progress of 
science. which has led up to a type of railroad car with a 
carrying capacity of 110 tons — which is considerably 
more than the average ship in George Washington's day 
could carry — and the evolution of the modern steamship 
of gigantic proportions, have reduced the respective costs 
of carriage, without however, essentially affecting the 
spread between land and water transportation. 

Ocean haul longer than land haul. — The third factor 
which accounts for lower water transportation costs is 
the fact that the average haul on the ocean is so much 
longer than the average rail haul. The United States is 
a country of such dimensions and its natural resources 
are distributed in such a way that considerable quanti- 
ties of bulk commodities have to be moved over long dis- 
tances. Nevertheless, the average rail haul does not ex- 
ceed 260 miles. In the absence of statistical data regard- 
ing the average haul in ocean shipping, an exact com- 
parison is impossible. However, a glance at a map of 
the world which gives the distances separating the most 
important markets between which the bulk of the world's 
ocean-going tonnage plies, will convince the observer that 
the advantage again lies on the side of the steamship, 
and that this advantage is bound to be very considerable 
indeed. Without going into details of trade routes and 
merchandise currents, it will suffice to remember that 
the bulk of our cotton export crosses the Atlantic, that 
almost all of Australia's wool travels practically half-way 
around the world, and that the products of Argentina's 



8 OCEAN SHIPPING 

fields and prairies and of Chile's mines cover from si^ 
to ten thousand miles before they reach their destina- 
tions. On the equator it is 10,000 miles across the Pacific 
Ocean; and in going from Vancouver to Hongkong, 
mail steamers cover a distance of 6,500 miles. 

Why do long hauls mean cheaper transportation than 
short ones? Everything else being equal, the terminal 
charges, that is, the expenses of handling the goods at 
either end of the voyage, are the same whether the cargo 
is carried ten miles or a thousand, but relatively speaking, 
they amount to so much less when spread over the longer 
haul as compared with the shorter. 

Ocean transportation requires less fixed capital. — With 
all these points enumerated in favor of the ship, perhaps 
the most important still remains to be mentioned ; name- 
ly, that before a train can pull out of New York to reach 
Yonkers, Chicago, or any other point, costly prepara- 
tions must be made to render the feat possible. The right 
of way has to be acquired, the road-bed built, the track 
laid, stations erected and signals and -safety devices in- 
stalled — efforts which in the United States represent an 
average per mile investment of not much less than $70,- 
000. In England, the corresponding figure is not far 
from $250,000.* On the other hand, the ocean beckons to 
the ship and is ready for use without any effort on the 
part of the ship-owner. 

To be sure, the seas are charted and patrolled, coasts 
lighted, channels marked and improved, harbors deep- 
ened and piers and docks constructed, but usually at 
government expense. If we ignore the support given by 

* See Johnson and Van Metre, Principles of Railroad Trans- 
portation, pp. Ill, 112. 



THE NATURE OF OCEAN TRANSPORTATION 9 

various governments during the early days of railroad 
history when generous land grants and other aids were 
proffered, no such contributions from public funds 
are available for the railroad owner in construct- 
ing his road; on the contrary, all equipment and im- 
provements rest upon private investment. In contrast, 
the ship-owner benefits by the nation's eagerness to gain 
its share of ocean commerce, and profits by the whole- 
some rivalry which prompts competing cities to outdo 
one another in the effort to attract steamships to their 
ports. This, however, holds true only to the extent that 
the cost of harbor works and other improvements is de- 
frayed by general taxation and not from pier leases, dues 
and other charges directly levied on the shipping busi- 
ness. This refers to terminal facilities. But the road- 
bed is furnished free. For so ample is the supply of 
water in the ocean, so wide its expanse, that the services 
rendered mankind by the sea in bearing the burden of its 
fleets, have remained a free good, free as the air that we 
breathe. 

History of the freedom of the seas. — This bring us to 
the second point of difference existing between land and 
ocean transportation : freedom of the seas versus national 
regulation of land transportation. There was a time 
when man extended the principle of territorial sover- 
eignty to his conquests on the watery deep. The Portu- 
guese who discovered the sea route to India regarded 
it as forming equally as concrete a part of their colonial 
empire as did Brazil. Anybody who dared to navigate 
these newly "acquired" waters was treated as an invader 
or looked upon as one who poaches upon the preserves 
of another. Even the enlightened Montesquieu held as 



10 OCEAN SHIPPING 

late as the eighteenth century that a nation may cede a 
sea to another as it may cede a strip of land. To-day, 
such an idea is unthinkable; beyond the three-mile limit 
national sovereignty ceases and the law of nature pre- 
vails, limited only by a few more or less clearly defined, 
more or less well understood and more or less efficiently 
enforced principles of international law. 

Essentials of economically free seas. — While we leave 
it to the diplomats and the experts of international law 
to interpret, from the l,egal and political standpoint, the 
meaning of "the freedom of the seas," a phrase abused as 
often as it is used, an economic treatise on ocean shipping 
would be incomplete indeed if it left untouched the im- 
portant subject of the economic restrictions imposed on 
ocean shipping. Even those who are at loggerheads as 
to the political meaning of "the freedom of the seas" 
usually agree that, certainly in time of peace, the seas 
have been and are free in the fullest sense of the word. 
If "freedom of the seas" means the right of a ship to 
cruise aimlessly about the high sea we are willing to 
agree with this view. But such freedom would be of 
little practical value. Our conception is that "freedom 
of the seas" in time of peace involves the following 
essentials •} 

(1) General freedom of navigation, i. e., liberty to 
come with ships and cargoes to places in the territory of 
all nations. 

(2) National, i. e., equal, treatment as regards the sta- 
tioning, loading and unloading of vessels in ports, docks, 
roadsteads and harbors ; 

^This enumeration follows in general the British interpretation 
as given in official documents. 



THE NATURE OF OCEAN TRANSPORTATION 11 

(3) National treatment in regard to duties of tonnage, 
harbor pilotage, lighthouse, quarantine, or other ana- 
logous duties or charges levied for the profit of Govern- 
ment, public functionaries, private individuals, corpora- 
tions or establishments of any kind; 

(4) Prohibition of differential flag treatment. 

British liberal policy explained. — These essential con- 
ditions have never been generally accepted by all the 
maritime nations. To be sure, since the middle of the 
last century the navigation policy of Great Britain, the 
leading maritime nation of the world, has generally 
followed these lines. It is based upon the great 
ascendency of the British merchant marine and the 
widespread character of the trade of the Empire, 
which make protection both unnecessary and unde- 
sirable. The main object of this policy was to obtain 
free access to the ports and the trade of foreign countries. 
Privileged treatment at home would have meant little to 
the British merchant marine, but would have afforded 
foreign countries an excuse for similarly discriminating 
in favor of their own vessels. "In view of its great size, 
the British merchant marine stood to gain more from 
free access to foreign countries than foreign flags stood 
to gain from free access to British ports ; and conversely 
a policy of mutual restriction would for the same reason 
have caused more harm to British than to foreign 
shipping."* 

Under the influence of this British doctrine, and, 
furthermore, affected by the teachings of eighteenth cen- 

1 Reports of the Departmental Committee appointed by the Board 
of Trade to consider the position of the Shipping and Shipbuilding 
Industries after the War. London, 1918, p. 106. 



12 OCEAN SHIPPING 

tury liberalism, other countries, among them the United 
States, viewing the whole matter from a dollars and cents 
standpoint, allowed their carrying trade to pass under 
foreign, principally British, control. 

Freedom never complete: cabotage reserved to na- 
tionals. — But even during the height of this period of 
extreme liberalism, certain restrictions remained. In the 
first place, with the exception of Great Britain, every 
prominent maritime nation of the world has excluded 
foreign shipping from participating in its coastal trade. 
And "cabotage," as coastwise trade is called in the tech- 
nical language of shipping, is a wide term. A voyage 
from New York to Hawaii or from Riga to Vladivositok 
is considered a coastal trip, and is treated as such. Now 
the Australian Government wishes to extend that coun- 
try's coastwise shipping laws to the trade with the newly 
acquired insular possessions in the South Sea. French 
shipping interests would like to see foreign ships pro- 
hibited from carrying goods between France and Indo- 
China. Our own coastwise laws are to be extended to 
include the trade with the Philippine Islands.* It is 
not improbable that other countries will follow these 
examples and thus limit further and further the free 
areas of the sea. Instead of the seas being made free, 
one of the economic consequences of the war seems to 
be a constant diminution in the number of trade routes 
open to all nations. 

Other restrictions. — Besides this nationalization of 
"cabotage," numerous other cases of discrimination can 
be dted. A case in point is the French "Surtaxe 

> See Merchant Marine Act, 1920, discussed in Chapter XXX. 



THE NATURE OF OCEAN TRANSPORTATION 13 

d'Entrepot," which is a special duty imposed on all goods 
not imported into France direct from .the country of 
origin. This duty is a remnant of mercantilist days and 
represents an indirect discrimination against foreign 
shipping. France furthermore requires that foreign ships 
employ a special class of brokers whose fees amount to 
a substantial tax on shipping and overseas trade. France 
is not the only country to discriminate in favor of her 
nationals. Portuguese ships in Portuguese ports pay only 
one-half of the dues paid by foreign shipping.^ 

Neo-Mercantile tendencies of to-day. — These ex- 
amples show that entire freedom of navigation has not 
existed, and does not exist to-day. As we have seen in 
the case of the coastwise shipping laws, the tendency of 
to-day is toward further restriction, toward wider dis- 
crimination in favor of national shipping. Even in Eng- 
land, voices are raised in favor of flag discrimination. 
But our own case is a better example of the trend of the 
times. The Merchant Marine Act of 1920 in several of its 
provisions reminds us of the mercantilism of the Naviga- 
tion Laws. We live in an age of neo-mercantilism, when 
national commercial policies are accepted or rejected on 
the basis of their respective bearing upon national power, 
on imperial aggrandizement — the League of Nations not- 
withstanding. 

There is a certain danger of overstepping the proper 
limits in legislating in favor of national shipping. If all 
maritime nations were to insist that all their foreign 
trade should be carried in their own ships, we would have 
the amusing spectacle of seeing these ships meet in mid- 
ocean and exchange their cargoes. The best that the. 

1 See Board of the Trade Reports, cited above, pp. 107-109. 



14 OCEAN SHIPPING 

advocates of a national merchant marine can hope and 
work for is that the ships of their nation should carry 
approximately half the imports and exports of their own 
country/ and share in the sea-borne trade of non-mari- 
time nations to an extent in keeping with the commercial 
and political place their country holds among the nations 
of the" world. 

Freedom of the seas inseparable from freedom of inter- 
national trade. — But this question of the "freedom of the 
seas" has a deeper meaning. It is inextricably linked 
with the wider problem of the freedom of international 
trade. For a ship, when viewed apart from the cargo 
it carries, is but a useless thing. What attracts it to a 
port is the paying cargo awaiting it there or an open 
market which welcomes the goods which it carries. 
Withhold the cargo and a port is closed to a ship as 
effectively as by a direct law forbidding it to enter. Ship- 
ping is but the instrument of trade and, on the whole, 
whatever limitations are placed upon trade have the 
tendency eventually to react upon shipping. Exceptions 
can be cited and the connection between cause and effect 
may often be blurred. But "the tendency is there, never- 
theless. 

In a deeper sense, therefore, there can be no real free- 
dom of the seas as long as there are colonial empires and 
protectionist countries — in short, as long as there is no 
freedom of international trade. There \& no more reliable 
way of testing the liberality or exclusiveness of colonial 
and commercial policies than by analyzing their results. 

^"Even England, whose vessels formerly carried 24 per cent of 
the international trade of nations outside the British Empire, carried 
at the same time only 52 per cent of her own trade."— E. N. Hurley, 
The New Merchant Marine, p. 274. 



THE NATURE OF OCEAN TRANSPORTATION IS 

France has openly pursued the policy of reserving the 
trade with her colonies for her own nationals and hei 
shipping has followed the lead, but England has always 
prided herself upon her unselfish policies in admitting all 
to the exploitation and development of her colonial em- 
pire. Nevertheless, we find that the bulk of the trade, 
and even to a larger extent the bulk of the shipping, be- 
tween and with parts of the British Empire have been in 
British hands. This state of affairs is certainly not due 
to the unwillingness of outsiders to participate. A care- 
ful analysis of the treaties, laws, rules and regulations 
relating to iriter-imperial trade and shipping, will reveal 
enough handicaps placed upon non-Britishers to account 
for their comparative lack of success in cutting England's 
lead. In saying this we by no means wish to imply that 
British success on the.seas has been simply the outcome 
of discrimination, past or present, in favor of British ship- 
ping and trade. We do not wish to detract one iota from 
the merits of Britain's great mariners and merchant princes. 
On the contrary, we have great respect for English 
acumen and perseverance and we sincerely wish that this 
country might take a leaf out of the book of England's 
experience and learn from the "Mistress of the Seas" the 
secrets of her success. If we refer in our illustration of 
limited sea freedom to acts or laws of Great Britain more 
frequently than to those of other countries, this is only 
natural in view of England's exceptional position as the 
leading maritime nation of the world. 

Petroleum a case in point. — In order to illustrate what 
we mean by trade advantages which react upon shipping 
and thus limit the freedom, of the seas, we may 
take the oil situation as a case in point. For rea- 



16 OCEAN SHIPPING 

sons inherent in the nature of the business, petroleum is 
usually carried by those interests which control produc- 
tion or refining, or both. What is the situation with re- 
gard to the oil resources of the British Empire? Is the 
exploitation open to all ? No. We quote from a report 
by Mr. Van H. Manning, Director of the Bureau of 
Mines, to the Secretary of the Interior, on "International 
Policies Affecting the World Petroleum Resources": 
"American oil companies are expressly excluded from do- 
ing business in Burma and a blanket concession of 99 
years was given to the Burma Oil Company (Ltd.) in 
1889, protecting this company from foreign competition. 
It is reported that recent legislation has limited the own- 
ership of oil properties in India to British subjects. None 
but British oil companies are operating in India." It may 
be noted that Burma is the most, important oil yielding 
region in British India. To quote further: "There is 
a decided national and nationalistic policy throughout the 
British Empire to favor and encourage British oil com- 
panies." "The development of a strong nationalistic 
sentiment among British oil companies is illustrated by 
the resolution recently adopted by the Lobitos Oil-fields 
(Ltd.), which produces in Peru, and has recently ac- 
quired oil lands in Ecuador, to prevent the transfer of 
more than 20 per cent of the capital to foreigners." 

In this connection the following extract from a recent 
speech of Mr. W. A. Harriman, President of the American 
Ship and Commerce Corporation which he made, before 
the Manufacturers' Export Association is of value : 

"We are operating a service from New York to Alexan- 
dria and the Levant. . . . One of the important com- 
modities which is imported from Alexandria is Egyptian 



THE NATURE OF OCEAN TRANSPORTATION 17 

cotton. This country consumes about one-third of the 
Egyptian crop. All the Egyptian cotton brought to this 
country is to-day carried in foreign bottoms and is shipped 
to us through European ports. Although we have been 
operating the service for eighteen months, it has been 
impossible for us to obtain a single pound of Egyptian 
cotton for our bottoms. The shipment of the entire crop 
is controlled by a British Conference in which a number 
of British shipowners participate. The British Confer- 
ence make a contract once a year with the Alexandria 
cotton merchants by which they agree to sell cotton only 
c. i. f., and to^ route all their shipments over the Confer- 
ence lines and the rate is fixed for the season. . . . 
Our consumer is not allowed to go into Alexandria and 
buy his cotton f. o. b. and ship at the lowest rate he can 
obtain. Our efforts to obtain a share of this business by 
working both in London and in Alexandria has so far 
been unsuccessful. The only result of our efforts last 
spring was that the contract for this year's crop was made 
five months earlier than it had been made the year before." 
There does not seem to be much left of the old spirit 
of liberalism. For what is true of petroleum and cotton is 
true of many other basic raw materials, particularly those 
that are used in the so-called key-industries. The only dif- 
ference is that the causal nexus between the control over the 
raw material — in other words, the cargo which ships may 
carry — and over the ships themselves is not always as 
direct and open as in the case of petroleum and of Egyp- 
tian cotton. 
Bernard N. Baker's idea of the "freedom of the seas." — 
One could go a step further and say with Bernard N. 
Baker, the late "Dean of American Shipping," that without 



18 OCEAN SHIPPING 

a fair distribution of the merchant tonnage of the wt)rld 
among the commercial nations, on the basis of their need, 
real freedom of the seas is unthinkable.* While it is easy 
to exaggerate the importance of national control over the 
facilities for carrying exports and imports, there is no 
denying that the lack of ocean tonnage is a serious handi- 
cap in the international struggle for raw materials and 
markets. 

The fuel situation. — There is one more economic 
aspect of the freedom of the seas. We refer to the limi- 
tations put upon this freedom by the one-sided control 
on the part of a few nations, particularly Great Britain, 
over the bunker supply, the coaling stations of the world, 
and in general over the way stations at which ships must 
stop for supplies on long-distance voyages. This control 
does not necessarily mean a limitation of the freedom of 
the sea. But it might. It is potential. It became an 
actuality during the war. British Black Lists were en- 
forced by rendering obedience to British dictatipn a 
prerequisite ito the supply of bunker coal. Viscount Grey 
wrote to the United States Ambassador:^ "What legal 
objection can be taken to this course? It is British coal; 
why should it be used to transport the goods of those 
who are actively assisting our enemies?" But he added: 

"There is indeed one preoccupation in regard to t!ie 
use of coaling advantages by His Majesty's Govern- 
ment which, nc doubt, is present in the minds of neu- 
trals, and which I recognize. I refer to the apprehen- 

^ Atlantic Monthly, January, 1919. 

^ White Paper entitled "Further Correspondence with the 
United States Ambassador respecting the 'Trading with the 
Enemy (Extension of Powers) Act, 1915'." 



THE NATURE OF OCEAN TRANSPORTATION 19 

sion that the potential control over means of transpor- 
tation thus possessed by one nation might be used for 
the disruption of the trade of the world in the selfish 
interests of that nation." 

Viscount Grey goes on to say that England has always 
used her naval power as a trust and that it has exercised 
this trust in the interest of freedom. With this statement 
some historians will agree and others will disagree, ac- 
cording to their viewpoints. But all will welcome the 
fact that the prominent part which oil is coming to play 
as a motive power and the control which this country 
has — at least as yet — over the world's oil resources will 
by force of circumstances lead to a fairer distribution of 
indirect control over international shipping and will thus 
put the freedom of the seas on a broader if not a safer 
basis. 

REFERENCES 

Baker, Bernard N. The Freedom of the Seas in Atlantic Monthly, 

February, 1919. 
Hough, B. O. Ocean Traffic and Trade, chap. I (1915). 
MuRKEN, E. Die Grundlagen der Seeschiffahrt. (Berlin, 1904.) 
National Foreign Trade Council. Ocean Shipping. The basic 

principles of marine transportation with particular reference to 

foreign trade of the United States, 2d ed. (House Doc. No. 2112, 

64th Cong., 2nd sess., March, 1917). 
OciLViE, P. M. International Waterways, Part I. The Evolution of 

the Principle of International Waterways (1920). 
Smith, J. R. Industrial and Commercial Geography, Part H, chap. 

n. (1913). 

United Kingdom. Board of Trade. Reports of the Departmental 
Committee appointed to consider the position of the Shipping 
and Shipbuilding Industries after the war. (London, 1918.) 



CHAPTER II 
OCEAN ROUTES 

The Nature of ocean routes. — There was a time when 
the ocean was "the trackless deep," a "waste of water," but 
seldom visited even by the daring seafarer who bartered his 
tiny cargo for the riches of far-away lands. But where once 
the pioneer slowly felt his way, to-day whole fleets are scur- 
rying to and fro, moving more cargo in a day than all the 
ships of former times could carry in a year. The "trackless 
'deep" has been covered with a network of shipping routes — 
highways and by-ways, trunk lines and branches, tributaries 
and distributaries. To be sure, these routes are mere ab- 
stractions, only imaginary lines connecting the oversea mar- 
kets of the world. But so steady has become the stream of 
ocean carriers, so constant the flow of commodities along 
certain lanes that, except for the lacking track of steel and 
the absent road-bed of stone, we have come to view the ways 
of the sea in much the same way as the roads on land, — 
equally as fixed and permanent. They are marked on the 
map as definite lines, as concretely drawn as the spur of the 
railroad or the turnpike and highway. 

The North-Atlantic lanes. — But such a comparison may 
easily lead us to an exaggerated impression of the fixity and 
permanency of shipping routes. Perhaps the North Atlantic 
route, connecting the two most important traffic producing 
centers of the world, northwestern Europe and northeastern 
America, is the only one whose nature approaches that of 
the railroad. Conditions here are altogether exceptional. 
Here the liner with her fixed route and regulated sailing 

20 



OCEAN ROUTES 21 

schedule, carries a larger share of the traffic than is the case 
in other parts. "It is the busiest of the seven seas: it is 
where new developments and revolutionary inventions in- 
variably receive their ocean-going commercial baptism: 
where luxury and elegance have been carried to a supreme 
degree; where the ingenuity and skill of the engineer are 
revealed most strikingly; and finally, it is the arena in 
which the struggle for supremacy between the various mari- 
time nations is contested most keenly and enterprisingly."* 

The result is first of all, that a large number of the ships 
used in this service are of such size and value that 
physical as well as economic considerations render their 
removal from this route as difficult as the removal of a 
railroad track. Secondly, the density of the traffic on this 
route has led to such a careful and exact demarkation of the 
paths which the giant greyhounds may follow as is found 
nowhere else on the ocean. The slower traffic of the sea is 
everywhere as free as is the street traffic of a small town. 
But the North. Atlantic resembles the crowded streets of a 
metropolis, and the interest of all concerned has led to as 
stringent regulations as those which control the traffic of our 
large cities. "Keep to the right" is the rule, and means in 
this case keep 50 miles to port side. The honor belongs to a 
brilliant officer of the United States Navy, M. F. Maury, of 
having worked out an acceptable system of tracks for the 
North Atlantic express service. He first proposed the mat- 
ter in 1855, but it was not until 1891 that the first group of 
steamship owners agreed to follow Maury's routes, and not 
until 1898 that their general adoption was assured by a writ- 
ten agreement, signed by all the large transatlantic steam- 
ship companies. The Titanic disaster caused a radical re- 

1 F. A. Talbot, "Steamship Conquest of the World" Preface. 



22 OCEAN SHIPPING 

vision of the summer route. The lanes to be followed differ 
to a marked degree from the Great Circle (the shortest 
route). But the greater safety from ice, drifting derelicts, 
etc., cannot be bought too dearly by any loss of time. 

Flexibility of ocean routes. — The North Atlantic route 
is, however, an exception to the rule, for ocean routes are 
seldom fixed or even clearly defined. As we shall see, the 
bulk of the world's sea-borne commerce is moved by tramps, 
and they are free to go wherever the prospect of profitable 
cargo calls. Their movements are heavier along certain 
ocean lanes than along others, but these movements shift 
from season to season and from year to year. Even line 
traffic does not form a rigid system of routes ; new branches 
are added, new lines are opened, old ones discontinued, 
etc., as the kaleidoscopic changes of world market con- 
ditions demand. 

Definition of an ocean route. — It is therefore difficult 
even to define an ocean route. Is regular line service that 
once in a great while calls at a lonesome island in the South 
Sea, a trade route? Shall we call a trade route a movement 
of tramps that reaches an enormous volume at the height 
of the season and dies down to nothing for the rest of the 
year? We agree with Professor A. J. Sargent, of the 
University of London, whose answer is this: "If a consider- 
able number of ships, during an appreciable period of time, 
follow the same track, for similar purposes, we are justified 
in marking the track as a trade route."^ But even that 
at best is vague. 

What, then, determines the position and direction of ocean 
routes? Shipping is but the handmaiden of commerce. 

1 Seaways of the Empire. Notes on the Geography of Trans- 
port, p. 23. 



OCEAN ROUTES 23 

Without available cargo, ships swing idle at anchor, destroy- 
ing value, not creating it. Trade, therefore, determines the 
direction and volume of ocean routes and with it also their 
character and profitableness. Sea-borne trade in turn, de- 
pends upon traffic-producing factors in oversea markets. 
Hence, the elements ultimately determining the course of 
shipping are the geographical conditions in one part of the 
earth in relation to the conditions in other parts. Of 
course, it is also true that "facilities beget trade." Or, as 
ex-President Wilson expressed the same thought: "It may 
seem a reversal of the natural order of things, but it is true 
that the routes of trade must be actually opened — ^by many 
ships and regular sailings and moderate charges— before 
streams of merchandise will flow freely and profitably 
through them."^ In a way, therefore, shipping and trade 
are mutually dependent. 

A word should be said about the elements of the geo- 
graphy of commerce. The most striking feature is the con- 
• centration of the world's energetic population in the north 
temperate zone. The corresponding belt of the southern 
hemisphere is gaining, but the tropics and sub-tropics, equal 
in area to about 24,000,000 square miles, and with a popula- 
tion of 800 million people as against 900 million in the two 
temperate zones, supply but 1/6 (in value) of the merchan- 
dise now entering international trade; i. e., 3 billion dollars 
out of a total of ISj^ billions.^ 

Latitudinal character of present vrorld trade. — At pres- 
ent, therefore, an overwhelming proportion of the world's 
trade moves from one area of the north temperate zone to 
another. We may say it follows the latitudes. The reason 

1 Address before Congress, Dec. 8, 1914, 

2 The Americas, June, 1918, p. 26. 



24 OCEAN SHIPPING 

for this is simple. As yet, trade is largely the result of 
different stages in the economic development and not so 
much prompted by natural differences. The signs of the 
times tell us that America is rapidly reaching Europe's 
stage of industrialization, which will reduce the relative 
significance of this now all important latitudinal trade. 

But already the southern temperate zone has strongly 
come to the fore. Enormous volumes of commodities move 
up the longitude — though seldom in a straight northerly or 
southerly course. But countries like South Africa, Australia 
and Argentina also have an industrial future. They, too, 
will some day turn their own raw materials into manu- 
factured products. 

The future importance of the tropics. — This leaves the 
trade with the tropics as the trade of the future, which 
nature creates because it is the trade between geographical 
zones of different climatic conditions, inherently interdepend- 
ent. The trade of the future will follow the longitudes 
rather than the latitudes. This development does not belong ■ 
to so distant a future as some may think. During the period 
from 1900 to 1919 the value of tropical imports into the 
United States increased from only $350,000,000 to over two 
billion dollars. The rapid growth of the population of the 
temperate zone will necessarily bring to light the dormant 
treasures of the tropics and sub-tropics, and technical pro- 
gress will accelerate the process. The aeroplane will carry 
the explorer over pathless swamps and forests, the tractor 
will help to draw out of the virgin soil what is denied the 
beast of burden, and the motor truck will furnish the neces- 
sary transport facilities until the railroad supplements or 
supplants it. 

These revolutionary changes will affect the shipping 



OCEAN ROUTES 25 

routes profoundly. While the North Atlantic route will 
hardly lose in absolute importance, yet its relative significance 
will be impaired by the development which the trade with 
the tropics is about to experience. 

The load-index. — The conditions which have been 
discussed so far, account for the location of the termini 
of ocean routes, the points of origin and of destination. The 
ideal trade route would consist of two commodity streams of 
equal volume flowing in opposite directions. Such a route 
does not exist, but the more closely conditions approach this 
ideal the greater is its profitableness. This balance between 
the two opposite streams of commodities of a given route 
largely determines the "load-index" of the vessels employed 
on it. The "load-index shows the average degree to which 
the available carrying capacity of the tonnage employed is 
profitably utilized. To be sure, other considerations come 
into play, such as the necessity for regular and frequent 
sailings regardless of cargo available, and the nature of the 
commodity carried. But the ratio of outward to return 
freight is the biggest single factor affecting the "load- 
index" and thereby the profitableness — in absence of arti- 
ficial rate control— of a shipping route. 

Shipping Board statistics of ocean routes. — Until re- 
cently, no reliable data have been available for the respective 
tonnage requirements of given trade routes. The Division 
of Planning and Statistics of the United States Shipping 
Board has rendered a valuable service by compiling and pub- 
lishing a series of studies of "The Trade of the United States 
with the Principal Regions of the World in 1914 and 1918, 
showing Imports and Exports in Long Tons and Deadweight 
Tons of Shipping Required." 



26 OCEAN SHIPPING 

We will let the authors of this valuable publication speak 
for themselves : 

"With this Bulletin the Shipping Board inaugurates a 
service which it is hoped will meet one of the greatest needs 
of the shipping industry. The purposes of this service are 
to assist ship operators in gauging the tonnage requirements 
of the trade regions in which they are interested; to indi- 
cate avenues for the profitable employment of the American 
Merchant Marine ; to assist in securing an equitable distribu- 
tion of American tonnage; and to place at the disposal of 
the shipping industry facts which are ordinarily gathered 
either through years of experience or at an expense prohib- 
itive to individual companies. The scope of this publica- 
tion is threefold: 

(1) To translate the foreign trade of the United 
States into terms of ships and cargoes — ^that is, 
to reduce the total trade with the various regions 
to the common denominator of long tons and then 
to compute the amount of deadweight tonnage 
required in continuous service to move this vol- 
ume of ocean-borne trafHc. 

(2) To show the seasonal fluctuations in the move- 
ment of commodities; and 

(3) To indicate the probable movement of commod- 
ities to and from the various trade regions during 
current calendar year. 

"As this service is for the shipping industry, the statis- 
tics of imports and exports are given in weight (long tons 
and deadweight tons) and not in values. The values of 
imported and exported commodities may be ascertained by 
consulting publications of the Department of Commerce 



OCEAN ROUTES 



27 



through whose courtesy and cooperation the basic figures 
for reducing the foreign trade of the United States to terms 
of long tons and deadweight tons have been obtained." 
The results of these studies which form the contents 
of a series of Bulletins, may be summed up in the follow- 
ing table : 



TRADE VOLUME AND TONNAGE REQUIREMENT 
AMERICAN TRADE ROUTES 



ON 



REGION OP SHIPMENT OR 
DESTINATION ' 



Totals 

North American: 

Canadian, Atlantic and Pacific 

Regions , 

Alaskan Region 

Hawaiian Region 

Middle American: 

West Indian Region 

Porto Rico 

Eastern and Western Caribbean 

Region 

Mexican Region: 

Overseas 

Overland •. . . . 

South American: 
Amazon and East Brazilian 

Regions •_• 

River Plate Region 

Central and North Chilean. . 
Peruvian Region. .... ... ... ■ 

North European and Mediter- 
ranean; Europe and Mediter- 
ranean Africa 

Greenland Region 

■West and South Africa: . 

West and South African Re- 
gions 

Indian Ocean: 

British Indian Region 

East Indian Region : - - -v,' ' 

East African and Arabian Re- 
gion 

East Asian: 

East Asian Region 

■Philippine Region 

Australian 



Import Movement to 
the United States 
1918 (Fiscal Year) 



Long 
Tons 



29,676,223 



Deadweight 
Tons 



5,212,457 



Export Movement 
from the United States 



Long 
Tons 



Deadweight 
Tons 



62,790,329 



10,642,918 



9,098,218 
187,556 
613,454 

4,001,746 
434,027 

1,360,070 

5,063,357 
651,009 



897,795 

658,731 

1,810,613 

185,377 



1,939,076 
5,151 



139,462 

463,011 
4?5,637 

34,125 

958,524 
427,445 
311,839 



12,629 
88,056 



408,194 
44,783 



318,323 
448,520 



415,260 
549,833 

55,485 



827,325 
1,949 



77,301 

383,308 
317,630 

22,019 

492,999 
224,340 
164,604 



28,883,806 
345,215 
538,455 

3,455,153 
424,797 

1,427,907 

713,437 
421,865 



999,165 

1,018,410 

790,185 

233,242 



20,458,358 
15,144 



217,104 

255,600 
179,332 

40,925 

1,764,567 
151,210 
456,452 



87,660 
26,848 
89,221 

398,258 
46,594 

184,391 

93,583 



401,331 

575,050 

317,699 

75,464 



6,810,710 
6,475 



123,370 

191,050 
132,978 

34,059 

740,866 

76,963 

230,348 



28 OCEAN SHIPPING 

Trade routes of the British Empire. — Professor A. J. 
Sargent has made a similar study of the trade between 
ports of the United Kingdom and oversea markets. The 
following is a compilation of his findings^ which in view 
of the enormous importance of British trade and ship- 
ping represent a valuable contribution to the study of 
world shipping. 

APPROXIMATE AVERAGE LOAD-INDEX OF IMPORTANT 
BRITISH SHIPPING ROUTES : 

Out Home 

United Kingdom— South Africa 30* 20* 

—Australia 50* 60* 

—New Zealand 45* • 75 

—Indian Ocean 70 100 

—Far East 75 55* 

—United States 25* 60* 

—Canada 25* 65* 

—River Plate 90** 100 

—Brazil ....100** 35 

* Considerable passenger travel affects load-index. 
** Almost exclusively coal. 

Professor Sargent's calculations are based upon 1912 
figures. In what manner and to what extent the war 
has affected these relationships appears clearly from the 
chart on page 29. 

On the whole, we might say these dislocations have 
been rather quantitative than qualitative. The amounts 
have changed, but the intrinsic features of the trade have 

1 Seaways of the Empire. Notes on the Geography of Transport. 



OCEAN ROUTES 
TRADE DISLOCATIONS DUE TO WAR 



29 









































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Reproduced by permission of Carnegie Endowment for International Peaco, 
from InAuence of the Great War upon Shipping, by J. Russell Smith, New 
York, Oxford University Press, American Branch, 1919. 



30 OCEAN SHIPPING 

undergone little change. The one important exception 
to this rule is the virtual termination of British coal ex- 
ports to South America. That matter will be discussed 
in a later chapter. 

Triangular voyages. — Of all the valuable . information 
conveyed by the Shipping Board's figures and' by 
Professor Sargent's tabulation, that which here in- 
terests us rnost is the frequent discrepancy between 
outward freight and return cargo and the result- 
ing effect upon ship movements throughout the world. 
If a ship carries coal from Cardiff to Brazil, where 
no return cargo is found, she does not return in ballast 
to get more coal, but every effort is made to reduce the 
ballast voyage to a minimum by calling at the nearest 
port that does offer freight. To use a technical term, 
the ship makes a triangular voyage. It is easy to read 
from our tables the directions in which such round- 
about voyages are apt to be made. Take, for instance, 
"Europe and Mediterranean Africa" on the Shipping 
Board table. We note that almost 7,000,000 D. W. tons 
had to be allocated to this route in 1918 for exports from 
the United States, while less than one million sufficed 
to carry the trade moving in the opposite direction. On 
the other hand, Hawaii offers a good example of a well- 
balanced trade movement. 

Even steamship lines operating over regular routes, 
sometimes have to resort to triangular voyages. "As an 
instance of the lengths to which it is sometimes neces- 
sary to go in order to operate at a profit, a steel cor- 
poration, in order to put its service to Vancouver on a 
paying basis, was obliged to sail its vessels from Van- 
couver to France before returning to New York. Four 



OCEAN ROUTES 



31 



complete changes of cargo were required, the itinerary- 
being : 

From New York to Vancouver with steel ; 
Vancouver to the Gulf of California with coal or 

lumber; 
Gulf of California to Dunkirk, France with copper 

matte ; 
Dunkirk to New York with French chalk." ^ 

Examples of typical triangular tramp voyages are the 
following : 



TYPICAL TRIANGULAR TRAMP VOYAGES 
CARDIFF ;v LIVERPOOL NEWCASTLE^ LONDON 

CANARY I 





%\ BALLAST ^^^^ <^ COAU ^^^ 



NEWPORT NEWS. SAVANNAH 




1 Shipping's Share in Foreign Trade, Guaranty Trust Company 
of New York; pp. 18-19. 



' 32 OCEAN SHIPPING 

The middle link does not necessarily represent a bal- 
. last voyage ; it may be possible to pick a little "way 
freight" to reduce the expense. 

In reality the shipping situation does not appear as 
schematic as the foregoing tables might lead one to be- 
lieve. The peculiarities of the passenger business, the 
employment of special types of vessels such as tankers, 
molasses ships, refrigerator ships, — the different uses to 
which tramps and liners are put — all of these special fac- 
tors reduce the value of general averages and necessi- 
tate modifications of the general conclusions which one 
may draw from the relation of outward cargo to return 
freight. But these disturbing factors will be taken up 
in their proper place. 

Fuel cost and other expense items affect profitableness 
of route. — So far we have investigated cargo movements 
as the determining factor in the routing of shipping. 
The cargo is the source of income of the shipowner, and 
as such deserves first and, foremost attention. But prof- 
itableness depends on net income, that is, gross earnings 
minus operating expenses. Therefore, anything that af- 
fects expense items aflFects the profitableness, and in con- 
sequence, the desirability, of a route. With most vessels, 
fuel cost is the biggest single item of operating expense. 
The price at which fuel, that is, coal or oil, may be had 
along a trade route is therefore a vital consideration. 
This question is crucial for a vessel with a very limited 
steaming radius. Suppose a steamer engaged on a 6,000- 
mile voyage finds one single coaling station midway. 
It means she has to bunker for 3,000 miles at a time. If 
an alternative route is open, offering coal every 1,500 
miles, but half the bunker space, tvill be required, with a 



OCEAN ROUTES 33 

corresponding increase in the space available for cargo. 
Unless the loss in time counts too much the second route 
would be preferred. 

A low fuel price, coupled with frequent fuelling oppor- 
tunities, renders an ocean route attractive. Much of the 
competition between the Panama and Suez Canals will 
be a matter of dollars and cents payable by the ship- 
owner for coal or oil on either route. 

Undoubtedly the improvement of the marine engine, 
resulting in a fuller utilization of every ounce of coal 
burned under the boiler, thus lengthening the steaming 
radius obtained from a given quantity of fuel, and to an 
even greater extent, the wholesale transition from coal 
to oil, have greatly reduced the value of frequent fuelling 
opportunities. As a result of the greater efificiency of 
the modern marine engine it is no longer necessary to 
make as frequent circuits to out-of-the-way coaling sta- 
tions as formerly. The greater the steaming radius, the 
more. closely can the steamer follow the shortest route 
to her destination, owing to the spherical shape of the 
earth, the arc of the Great Circle passing through the 
two points in question. 

Great Circle routes. — We are so used to the axiom 
that a straight line is the shortest distance between two 
points and so prone to forgot the limitations of the ordi- 
nary map of the world on Mercator's projection that it 
is hard, at first, to fully realize the meaning of the state- 
ment that, on a globe, the arc of a circle is the shortest 
connection between two points. But a glance at the 
globe quickly dispels all doubts. Then we readily un- 
derstand why the shortest route from New York to the 
English Channel, for instance, skirts the Grand Bank, or 



34 OCEAN SHIPPING 

why the San Francisco- Yokohama line, via the Great 
Circle, curves northward to the Aleutian Islands, thereby- 
saving almost a day's steaming. The vessel with the 
greatest steaming radius can take the fullest advantage 
of the Great Circle route. 

But the shortest route is not necessarily the most de- 
sirable one. As we have seen, the fuel question necessi- 
tates frequent deviations. The chance to pick up way- 
cargoes invites them. In the case of passenger ships, 
regard for safety leads to important modifications, and 
as the Atlantic situation illustrates, greater safety is re- 
flected in lower insurance rates. The proximity of other 
vessels works the same way. Climatic conditions influ- 
ence the routing, especially of passenger vessels. The 
respective climates of the Red Sea and the waters ad- 
jacent to the Panama Canal will be another important 
factor in deciding the outcome of the competition be- 
tween .the two great waterways. 

Political aspects of ocean routes. — Where political ex- 
pediency demands the establishment of regular services, 
such as the various subsidized mail and express lines 
connecting oversea possessions with the mother land, 
the various economic considerations, while not arbitrarily 
ignored, are often subordinated. The "all-red" ocean 
routes of the British Empire are the most prominent ex- 
amples of this kind. 

Planetary winds and sailing routes. — So far we have 
confined our attention to the steamer. But the sailing 
vessel has not yet altogether disappeared. Its impor- 
tance is still sufficient to justify a few words on the 
geography of the winds. In the following diagram an 
actually complicated situation is reduced to its simplest 



OCEAN ROUTES 



3S 



elements. We note four distinct zones of regular air cur- 
rents of which the sailing ship tries to take the fullest 
advantage, seeking the favorable and shunning the ad- 
verse. As the heat equator shifts with the change of 
seasons the entire system of air currents likewise moves 
north or south. 

SCHEMATIC PRESENTATION SHOWING PLANETARY 
WINDS 




There is one important exception which deserves men- 
tion, that is, the northern portion of the Indian Ocean. 
Here the large land mass of Asia in summer becomes 
so much hotter than the ocean to the south of it that 
during that season there is a strong southwestern air 



36 OCEAN SHIPPING 

current, the monsoon, blowing from the Equator to the 
arid land mass lying to the north, a reversal of the other- 
wise prevailing trade wind. In winter the situation here 
is normal. 

These wind conditions explain the fact that for the 
sailing vessel the distance in nautical miles^ is relatively 
unimportant. Her captain figures the voyage in days, 
not miles, for the route long in miles is often shorter in 
days. Thus the trip across the Atlantic from Europe 
to the United States is either a wide circuit to the south 
of «the latitude of the Westerly or to the north, according 
to the season. This roundabout route is not necessary 
when going in the opposite direction, for, as Franklin 
correctly stated, "it is down hill to England." The Wes- 
terlies also explain the fact that ordinarily sailing vessels 
"round the Cape" to Australia but "double the Horn" 
on their way back. 

Winds afFect steamer routes. — Even steamers are af- 
fected by the winds, especially by the North East Trades 
of the North Atlantic and the brave west winds of the 
"Roaring Forties." While the modern steamer can fight 
her way against these winds, either a reduction of speed 
or a larger coal bill reflects the increased eflFort. This 
is best illustrated in the South Pacific trade. Most 
freighters go to New Zealand around the Cape but re- 
turn by the Horn. Likewise those which for some rea- 
son have to return by the Cape do not head for Cape- 
town but for Durban, because a more northerly, though 
longer, course traverses a zone of better weather and 
avoids the Westerly where it blows the strongest. It is 
probable that cheap bunker coal at Durban also has a 

1 Nautical mile = 6,080 ft. 



OCEAN ROUTES 37 

bearing on this question. Thus even a modern marine 
engine, the latest product of engineering science, is not 
fully emancipated from the hindrances imposed by the 
forces of nature which so absolutely control the move- 
ments of sailing vessels. 

Proper routing of world tonnage means great saving, — 
The European War, with its consequent shortage of ton~ 
nage, has done much to impress upon the business world 
the value of proper routing. Much has been learned, 
and more will be, as a result of that costly lesson. It 
is now fully realized that a shortage can be remedied 
just as effectively by a fuller and more economical utiliza- 
tion of the existing supply as by increasing that supply. 
"Cris's-cross Trade" is just as wasteful on the ocean as 
on land. Striking examples are quoted by Professor J. 
Russell Smith, in "Influence of the Great War Upon 
Shipping" :^ 

"In ten months in 1917 the United States imported 
274,000,000 pounds of rice, and exported 201,000,000 
pounds. Some of it went to Greece, yet the main source 
of supply of rice for the world's export is Burma, beyond 
Suez. Despite the fact that Europe wails for food, we 
imported in that ten months 96,500,000 pounds of maca- 
roni from Europe. We exported 12,000,000 pounds of pea- 
nuts, and imported 48,000,000 pounds, enough to have kept a 
5,000-ton steamer busy for a year. It sounds unbelievable, 
but the tonnage busy carrying corn from Argentina to 
the United States in 1917 (the greatest corn producer 
in the world) would carry 2,000,000 bushels of wheat a 
year to the army in France. The list might be extended, 
but the point is certainly proved." 

ipp. 111-112. 



38 OCEAN SHIPPING 

The farther a market is away from the purchasing port 
the more ships it needs for adequate service. If, there- 
fore, a nearer market can supply the same commodity, 
ships are saved by substituting the nearer for the distant 
one. Therefore, the elimination of an entrepot trading 
centre,^ unless it happens to be situated on the direct 
j-oute from producing to consuming market, which is 
bound to be the exception rather than the rule, means 
an increase in tonnage available. Such shipping econ- 
omies were actually introduced under the irresistible 
pressure of war emergency. They will not all be per- 
manent in their entirety; indeed, some are unreasonable 
except as war measures. But the direct routing- to this 
country of large quantities of goods, such as rubber, 
Sumatra tobacco, tin, etc., formerly routed via Europe, 
especially through London, is likely to continue. 

The war has changed world trade routes. — More- 
over, changes in territorial sovereignty will revolutionize 
routing in those parts of the earth so affected. Much 
of Germany's entrepot trade with the Baltic will remain 
a lasting heritage of the Scandinavian ports into whose 
lap it was thrown by the hand of Mars. The greater 
dependence of Europe on the supplies of this hemisphere 
— foodstuffs, raw materials and fuel — which is apt to con- 
tinue for some time to come, adds to the significance of 
the trade routes leading to and from the Americas. This 
is further accentuated by the rise of production cost in 
Europe, which renders profitable, at least for the time 
being, a considerable trade in coal from this country to 
Europe, in competition with English coal, as well as 
many other movements of goods which formerly were 

1 For definition see Chapter V, 



OCEAN ROUTES 



39 



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40 OCEAN SHIPPING 

considered contrary to the elementary law of trade. To 
What extent the foreign exchange situation will over- 
come these abnormal conditions remains to be seen. 

Shipping Board routes. — The war also completely re- 
vised the division of ownership of the world's merchant 
marine among the sea-faring nations. This also will 
affect routing. Thus American ships are plying to-day 
on routes where before the war the Stars and Stripes 
were never seen. We reproduce here a chart which shows 
the network of steamship trade routes covered by Ship- 
ping Board vessels : 

But if the free play of competition is allowed to replace 
governmental control, the ships of the future, as of the 
past, will seek the best paying employment regardless 
of the flag they fly, subsidized vessels excepted. 

New lanes of world commerce. — Finally, the war has 
brought into the realm of probability the realization of 
long-hoped-for plans, such as a tunnel under the English 
Channel, under Gibraltar, and under the. Bosphorus. 
Moreover, it has given new significance to such arteries 
of land transportation as the Cape-Cairo Railroad, or 
that running from Constantinople to the very gate of 
India. -The map^ on page 41 shows the world's most 
important transportation lines: 

A project which is being widely discussed at present 
and which, if completed, is bound vitally to affect the 
routing of world shipping, is the plan of deepening the 
St. Lawrence river to permit its use by vessels drawing 
25 feet or more. The project is being energetically 
pushed by an organization known as the "Great Lakes- 

iprom "The Americas" (National City Bank of New York). 
Vol. S, No. 7, April, 1919, p. 22. 



OCEAN ROUTES 



41 




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42 OCEAN SHIPPING . 

St. Lawrence Tidewater Association" with headquarters 
in Chicago and executive offices in Duluth. 

"The Canadian government has spent money freely in 
the past upon the St. Lawrence route and is committed 
to large expenditures in the future. It is now engaged 
in reconstructing the Welland Canal, to give it a depth 
of 25 feet, which will cost $75,000,000 to $100,000,000. 
That work is about one-third done, and it will be of 
small service unless the St. Lawrence is made navigable 
at a similar depth. From the foot of Lake Ontario to 
tidewater at or near Montreal is 181 miles by the river, 
of which 113 is international boundary. It is said that 
expenditures required to make the river navigable would 
be confined to 46 miles of the 181, or a distance of about 
the length of the Panama Canal. Argument for the 
feasibility of the improvement centers largely upon the 
claim that the improvement of a comparatively short 
stretch of river will connect large bodies of navigable 
water." ^ 

It is estimated that improvements which would make 
the river navigable would at the same time produce ap- 
proximately 4,000,000 horse-power between Lake On- 
tario and Montreal, the income from which would pay 
interest on the entire expenditure. Estimates on the re- 
quired improvements are from $250,000,000 to $300,- 
000,000. 

Effective competition between land and water carriers 
will follow these accomplishments. In business, the man 
who wins is he who looks ahead a little farther than 
others. It is the same among nations. 

1 See Monthly Letter of National City Bank of New York. 
October, 1920. 



OCEAN ROUTES 43 

REFERENCES 

Gregory, Keller, and Bishop. Physical and Commercial Geography, 

Chaps. XI and XII (1910). 
Guaranty Trust Company of New York. Shipping's Share in 

Foreign Trade; Fundamentals of Ocean Transportation. (1919). 
Hough, B. O. Ocean Traffic and Trade, chap. V (1915). 
Johnson and Huebner. Principles of Ocean Transportation, Chap. 

V. (1919). 
KiRKALDY, A. W. British Shipping; Its History, Organisation and 

Importance, Book II. (London, 1914). 
National Bank of Commerce in New York. America and the 

New World Trade Routes in Commerce Monthly, Nov. 1919. 
Sargent, A. J. Seaways of the Empire; Notes on the Geography of 

Transport. (London, 1918). 
Smith, J. R. The Ocean Carrier, Chap. III. (1908). 

Industrial and Commercial Geography, Part II. Chap. III-XI. 

(1913). 
Talbot, F. A. Steamship Conquest of the Sea, Chap. XI. (London, 

1912). 
United States Shipping Board, Division of Planning and Statis- 
tics. Trade and Shipping between the United States and the 

Principal Regions of the World in 1914 and 1918. (1919). 

Relative Desirability of Ships Operating in four Trade Routes. 

(1919). 



CHAPTER III 

SUEZ AND PANAMA 

Isthmian canals as milestones of progress. — Man's con- 
quest of space, generally spteaking, is a hard struggle; 
progress is slow, and nature's obstacles are only gradu- 
ally overcome. But there have been great moments in 
the history of transportation, moments when the rate 
of progress has been phenomenally accelerated; such as 
came when the waters of the Red Sea met and mingled 
with the blue depths of the Mediterranean in the Suez 
Canal; and again when the Isthmus of Panama was 
pierced. Nature had challenged man's ingenuity and 
perseverance by blocking the entrance into the Indian 
Ocean from the northwest and into the Pacific from the 
east, by two amazingly narrow strips of land, thus forc- 
ing the bafifled mariner around dangerous capes thou- 
sands of miles out of his way. Man took up the chal- 
lenge and won. He battered down both doors leading 
into those vast and almost deserted waters, and now we 
are free to speculate which is the back and which the 
front door — Panama or Suez. 

An inter-oceanic canal, as such, is only an opportunity; 
the intended advantages remain potential until trade and 
shipping experiences translate them into actual facts. 
Therefore the changes wrought by new routes do not 
become apparent in a day. For business is conservative ; 
its inertia is surprising. It often clings to established 
customs and arrangements long after the superiority of 
new methods has been established. 

Early history of Suez Canal.-^A striking example is the 

44 



SUEZ AND PANAMA 45 

Suez Canal. When this work of the great French engi- 
neer and promoter, Ferdinand de Lesseps, was opened 
in 1869, steam navigation was still in its infancy and the 
prevailing type of ocean vessel was wind-propelled. But 
because of weather conditions, particularly those found 
in the Red Sea, the Suez Canal Route was practically 
closed to sailing craft. No wonder, therefore, that the op- 
position to the new route was strong -among shipowners 
and that the full benefit of the great short-cut was not 
felt until, encouraged by it, steamships began to replace 
their older rivals, sailing vessels. Likewise English mer- 
chants, especially those of London, did not view with 
complete equanimity the realignment which of necessity 
followed in the wake of this new trade route. They did 
not like to see Marseilles, Genoa, Venice, Trieste and 
other Mediterranean cities partly regain their place of 
old and import directly from India and the Far East 
a goodly share of the rice, cotton, etc., that crowded 
London's warehouses and formed her entrepot trade. 

Important happenings in the Canal's history. — There 
is no change that does not harm some one and to attempt 
resistance is but natural. But when the first period of 
adjustment has passed, any proposition of real merit 
has an assured future in spite of inevitable hindrances. 
Thus in the early history of the Suez Canal, many dif- 
ficulties had to be solved. There was the delicate ques- 
tion of what constituted the proper basis of toll charges : 
gross ton, net ton, displacement ton, deadweight ton, or 
actual cargo carried. After much blundering, and not 
until an international conference at Constantinople in 
1873 had threshed out the matter, a net ton of the Suez 
Canal Company's own calculation was decided upon. 



46 OCEAN SHIPPING 

Then there were delays, due partly to purely technical 
causes, partly to the rapid growth of the traffic. A single 
ship with a clear course would effect the eighty-mile 
transit in from twelve to fifteen hours. That was the 
rule in the early days shortly after the opening of the 
Canal, but by 1883 the time lost in passing had increased 
the average journey to 50 hours, while cases of three 
days were not unknown. But all those difficulties could 
be, and were, overcome most successfully. Since about 
1882, when the company was stirred by a protest from 
the business world, it has followed a liberal policy of 
steady improvements and gradual reduction of rates. 
The latter dropped from 13 fr. in 1876, per net ton reg- 
istered, to 6.25 fr. in 1913 ;* while, encouraged thereby, 
the traffic rose as follows '? 

Net tonnage Number of Mean net 

Year Suez Canal vessels tonnage 

1870 0.4 million 486 898 

1880 3.1 " 2,026 1,509 

1890 6.9 " 3,389 2,033 

1900 9.7 " 3,441 2,830 

1910 16.6 " 4,533 3,658 

1913 20.0 " 5,085 3,939 

1914 19.4 " 4,802 4,042 

1915 15.3 " 3,708 4.118 

1916 12.3 " 3,110 3,963 

1917 8.4 " 2,353 3,981! 

1918 9.3 " 2,522 3,669 

1919 16.0 " 3,986 

1920 17.6 " 4,009 — 

* At the time of this writing rates are fixed at 8.50 fr. See Janu- 
ary, 1920, edition of Reglement de Navigation of the Suez Canal 
Company. 

^ See Le Canal de Suez, Bulletin Decadaire de la Compagnie Uni- 
verselle du Canal de Suez, 1921. 



SUEZ AND PANAMA 47 

We note that both the number and the size of the ves- 
sels going through the Canal increased rapidly until the 
European War disorganized shipping. These cold fig- 
ures calmly sum up the result of long tireless eflFort. 
Before this stage was reached canal builder and ship- 
builder vied with each other in a close contest. No 
sooner had the Canal been deepened in 1908 from its 
initial depth of 26 ft. to 33 ft. than commerce clamored 
for larger ships with greater draft. By 1914, 36 ft. were 
available through the greater part of the Canal, allow- 
ing ships of 30 ft. draft to pass. Naturally, the other 
dimensions had to go hand-in-hand with the depth. Fur- 
thermore, the introduction of electric lighting, in 1887, 
permitting night navigation, materially increased the 
utility of the Canal. 

Commercial significance of Suez CanaL — ^What has the 
Suez Canal accomplished? Has it satisfied the hopes which 
its promoters and builders had placed in it? There are 
many angles from which this question may be approached. 
But invariably the answer will be an emphatic "yes." There 
is the purely financial aspect, the aspect of the stockholders. 
Surely they are satisfied with the return on their investment 
of about 135 million dollars, which sum includes all im- 
provements paid for up to 1915. There is furthermore 
the viewpoint of the statesman and the soldier to be con- 
sidered. In the canal they see a vital link in the British 
Empire's most important line of communication and defense. 
We pass over the idealistic value which accrues from the 
fact that Orient and Occident were drawn doser together 
by thousands of miles. A few figures will illustrate this 
reduction of distances : 



48 OCEAN SHIPPING 

Distances from Liverpool and New York via Cape Town and 
via the Suez Canal to Selected Ports: 
To 
From Bombay Batavia Hongkong Sydney 

Liverpool via: 

Cape Town 10,730 11,205 13,19Si 12,626 

Suez Canal 6,189 8,516 9,785 12,235^ 

Distance Saved. 4,541 2,689 3,410 391 

New York via: 

Cape Town3 11,511 11,986 13,966 13,306 

Suez Canal 8,102 10,429 11,673 13,5122 

Distance Saved. 3.409 1,557 2,293 —206 

1 Via Singapore. 

2 Via Columbo and Melbourne, 

3 Including call at St. Vincent. 

We may single out the commercial advantages which 
the world enjoys, since merchant vessels no longer need 
to circumnavigate the Dark Continent on their way to 
the East. Leaving aside the temporary oversupply of 
tonnage which of necessity goes with any shortening 
of trade routes and which disappears as soon as com- 
merce has grown enough to a'bsorb the surplus, we find 
that better transportation facilities traveling over a 
shorter route have brought down the cost of Eastern 
produce. European prices of special Eastern products 
fell from 25 to 35 per cent within fifteen years after 
the opening of the Canal. This increased the demand 
for these goods and stimulated their production, thereby 
materially adding to the prosperity of the Asiatic coun- 
tries. Indeed all parties concerned were benefited ; there 
was hardly a country that did not share in this boom. 



SUEZ AND PANAMA 49 

But not all parts of the world were affected in the 
same way or to the same degree. Up io the time when 
the Panama Canal was opened, the entire continent of 
Asia, as far as it is tributary to the Pacific Ocean, was 
served by the Suez Canal. This will continue to be the 
case for 4:he bulk of the trade because the Panama Canal 
primarily taps only the Far East. The big traffic-produc- 
ing centers of Southern Asia with their exports of wheat, 
jute, rice, tin, rubber, tobacco, etc., are India, Ceylon, 
Burma and Malaya, and they clearly lie within the sphere 
best reached by the Suez Canal. 

Competition between Suez Canal and Cape route. 

The Australian situation is very different. Here the 
Cape route continues as a big factor, successfully com- 
peting with the Canal. As we have seen from the chart 
on the preceding page, the saving in distance is less than 400 
miles for a 12,000-mile voyage. That is insignificant 
at best, but even 'this small advantage is furthermore 
offset by the expense of the Canal dues, the delay in 
passing through the Canal, and sometimes by the higher 
coal prices on the Canal route when compared with those 
prevalent on a trip around the Cape. Three phases may 
be distinguished in the competition between these two 
routes. In the days of the sailing vessel, the Cape route 
was the only feasible one; then as the steamer came to 
the fore, all steam traffic was diverted through the Canal, 
because South African coal was not yet marketed and 
the cost of sea-borne Wales coal Was prohibitive at Cape- 
town or Durban. But this situation, as has just been 
pointed out, was reversed when Natal- coal was offered 
at low prices in the South African market. Moreover, 
the progress made in the construction of marine engines 



so OCEAN SHIPPING 

was such that the stormy weather on the Cape route, 
which had originally proved so forbidding to the steam- 
ers, now lost its terror. The weather situation is espe- 
cially important on the voyage from Australia to Europe, 
since the steamer there must contend with the prevailing 
Westerlies, a force against which a weak engine is no 
match. Finally, the size of the steamer, because of the 
ensuing economies, tends to exceed the maximum capac- 
ity of the Suez Canal. Mr. Lincoln Hutchinson in his 
book "Panama Canal and International Trade Competi- 
tion" (p. 27) points out that for a typical cargo carrier 
operating under normal conditions total expenses via 
Suez will exceed those incurred on the voyage around the 
Cape by almost 30 percent. Thus, all these forces are 
simultaneously at work to direct the steam traffic between 
Australia and Europe or North America, away from the 
Suez Canal route to that around the Cape. 

Early history of Panama Canal. — The financial success 
of the Suez Canal encouraged its founder, de Lesseps, 
to try his hand at a more ambitious undertaking, that 
of cutting a canal through ihe Isthmus of Panama. The 
idea of such a short cut from the Atlantic into the Pa- 
cific had for centuries been almost a world obsession. 
Its accomplishment meant, as a great geographer has 
expressed it, "to shorten the circumference of the earth 
by one-fourth." It eliminated the longest and most 
hazardous voyage known to navigators. 

Thus when de Lesseps, in 1879, formed his Panama 
Company he only undertook to carry out a long cher- 
ished scheme of others. From time to time interest in 
the project had been aroused by the increasing trade 
growing up between the Atlantic and Pacific coasts of 



SUEZ AND PANAMA 51 

the Americ.as as well as by such events as the Mexican 
war, the Oregon country dispute and particularly by the 
"gold rush" of 1848. 

Since about 1840, the big powers who, because of 
maritime or other interests were most vitally concerned 
in the scheme, had begun to manoeuvre for points of 
vantage, fortifying them by numerous treaties. The ob- 
ject of these treaties, as far as this country was con- 
cerned, was primarily to secure the sole right to build 
an isthmian canal, guaranteeing at the same time equal 
treatment to all who would use it. Special mention 
should be made of the Clayton-Bulwer Treaity of 1850, 
and its revised form, the Hay-Pauncefort Treaty of 1901. 
This was a mutual agreement between the United States 
and Great Britain, guaranteeing that neither party would 
build and operate a Nicaragua Canal independently of 
the other. 

De Lesseps failed, not so much because of engineering 
difficulties, though a sea level canal was possibly too 
ambitious an undertaking for the stage of engineering 
technique then reached, but largely because the signifi- 
cance of sanitation was not sufficiently realized, and even 
more because of the criminal waste with which two- 
thirds of the building funds were squandered in France 
in bribing the press and the electors and elected alike. 
Actual building had been going on from 1883 to 1889 
and was resumed for a short time five years later by a 
reorganized French company. It failed likewise, shar- 
ing its fate with an American syndicate which had strug- 
gled in vain from 1885 to 1893 to construct a canal across 
the Nicaragua route. 

United States completes Panama Canal. — The final 



52 OCEAN SHIPPING 

curtain rose on the last act of this great world drama 
when, in 1902, the United States decided upon the com- 
pletion of the project. From this time on events fol- 
lowed each other in rapid succession : the purchase from 
the French company of its concessions and property for 
$40,000,000, the revolution in North Colombia, resulting 
in the secession of the Republic of Panama, with 300,000 
inhabitants, and finally the treaty of November 18, 1903, 
in which the new state ceded, or literally leased, the 
Panama Canal Zone to the United States for a period of 
one hundred years. Actual work could now begin. 
Where yellow and malarial fevers formerly had raged 
unchecked (22,000 people had died during the de Les- 
seps work), sanitary conditions were now established, 
spreading the fame of Colonel Gorgas throughout the 
world. After careful consideration, the plans for a lock 
canal were finally accepted in preference to the sea-level 
canal favored by European experts; and under General 
Goethals' ingenious leadership the world's greatest en- 
gineering feat was accomplished in a relatively short 
time. In 1914, the canal was opened to commerce. 

Suez and Panama compared. — The physical features 
of the waterway have been described so often that we 
would only retrace the steps of others if we were to give 
a detailed account of them. It may suffice to give a few 
data comparing the Suez Canal with its new rival. 

Panama Canal Suez Canal 

Cost $400,000,000 $100,000,000 

Length SO miles 100 miles 

Min. depth 41 feet 36 feet 

Min. bottom width 300 feet 100 feet 

Dues $1.20 8.50 fr. 

Time consumed in passing 10-15 hours 15-20 hours 



SUEZ AND PANAMA S3 

It was unfortunate in many ways that the opening 
of the Panama Canal should have almost coincided with 
the outbreak of the European War. For sentimental 
reasons it is regrettable that one of man's proudest 
achievements was opened 'to traffic almost unheralded. 
But few noted the event when, on the 15th of August, 
1914, the first commercial vessel, the American steam- 
ship Ancona, passed through the Canal. 

War cripples Panama Canal traffic. — But the war did 
more than merely to dim the glory of an auspicious open- 
ing. It threw a dark shadow over the first years of its 
operation. It practically tied up the entire tonnage of 
the Central Powers; it caused an unprecedented concen- 
tration of shipping in the Atlantic, virtually eliminating 
all long distance routes which otherwise would partly 
have used the canal. By causing an unparalleled tonnage 
shortage, it directed towards the railroads those goods 
coming from or going to the East and Australia, which 
otherwise would have passed through the canal. Thus, 
generally, by hindering the free development of inter- 
national trade intercourse and by reducing the world's 
tonnage, the war adversely affected the -canal's oppor- 
tunities. Therefore, it is not surprising that anticipa- 
tions were not fulfilled. In spite of these facts, some 
abnormal and therefore temporary, traffic accrued to the 
canal, for instance, much of the nitrate shipment for 
Chile, which was purely war trade. The table on page 54 
shows the growth of traffic* 

Panama Canal tolls. — A word should be said about the 
tolls which vessels using the canal are required to pay. 
After an exhaustive investigation by Professor E. R. 

* Panama Canal Record. 



54 OCEAN SHIPPING 

Number of Panama Canal 

ships Net tons Cargo tons 

1915 1,171 3,948,480 4,966,560 

1916 1,278 3,929,014 4,931,911 

1917 2,081 6,362,387 7,557,712 

1918 2,233 6,484,604 7,334,510 

1919 2,394 7,128,497 7,702,748 

1920 2,814 10,378,000 11,236,000 

Johnson, the toll was fixed by a presidential order at 
$1.20 per net ton for ships carrying cargo or passengers, 
while a reduction of 40 per cent is granted to ships going 
through in ballast. War vessels pay 50 cents per ton 
of actual displacement. Since Congress, in June, 1914, 
repealed the law which exempted American coastwise 
ships from the payment of the toll, there have been no 
exceptions to this rule, if we overlook the insignificant 
fact that the government ships of Panama have the 
privilege of free passage.^ The statutory maximum of 
tolls that can be charged is $1.25 per net ton (national 
measurement rules of U. S. A.). Efforts are being made 
to have this law changed. On October 1st, 1919, the 
House of Representatives passed a bill (H. R. 7015) — it 
is now in the hands of the Senate for consideration — the 
purpose of which is to make the Panama Canal rules of 
measurement govern in determining the tolls to be paid. 
As it is, except for vessels transiting in ballast, the Pan- 
ama Canal rules of measurement figure only in the statis- 
tical record. The reason is both simple and interesting. 
From the first, the rate of tolls established at $1.20 per net 

'•As this book is going to press, signs are multiplying that the whole 
question of toll exemption for American vessels engaged in coastwise 
traffic will be reopened. The outcome of the 1920 Presidential elec- 
tion may have a bearing upon the outcome of the struggle which 
would ensue. 



SUEZ AND PANAMA 55 

vessel ton of actual earning capacity, as determined by 
Panama Canal rules was higher than a rate of $1.25 per 
ton of net capacity as determined by United States na- 
tional rule, simply because the ratio of net tonnage by 
national rule of any country to actual earning capacity is 
substantially less than the ratio of 120 to 125. The result 
has been that for loaded vessels using the canal, the legal 
maximum of $1.25 per net ton national measurement rules 
acted as a peg preventing the application of the $1.20 toll 
charge per net ton Panama Canal rule. The purpose of 
the bill which Mr. Esch introduced on July 12, 1919, is 
to remove this peg, incidentally permitting thereby a raise 
in the Canal toll receipts.^ 

Economic significance of Panama Canal. — The chief 
value of the Panama, as of the Suez Canal, lies in the 
fact that it reduces the distance to and from important 
world markets. 

TABLE SHOWING REDUCTION IN NAUTICAL MILES 
AFFECTED BY THE PANAMA CANAL 2 

FROM 

TO New York Savannah New Orleans Liverpool 

San Franciscoi 7,873 8,276 8,868 5,666 

Honoltilui 6,610 7,004 7,605 4,403 

Valpatiaisoi 3,747 4,141 4,742 1,540 

Yokohama^ 3,768 4,649 5,705 -694^ 

Shanghai^ 1,876 2,757 3,813 -^,852' 

Hongkong!! -18» 863 1,919 -4,172= 

Sydney* 3,932 4,598 5,444 —ISO' 

Wellington^ 2,493 2,887 3,488 1,564^ 

1. Difference between Panama and Magellan routes. 

2. Difference between Panama and Suez routes. 

3. Distances less via Suez route. 

4. Difference between Panama and Good Hope route. 

IFor additional details see House Document No. 126 66th Con- 
gress, 1st Session, Panama Canal Tolls, Letter from the Secretary 

° 2 Johnson and Huebner, Principles of Ocean Transportation, p. 86. 



56 OCEAN SHIPPING 

These reductions in the length of voyages result in saving 
of time and money. They reduce the price of transportation 
and force down the price of commodities brought from 
distant markets, thereby increasing their salability and 
helping the producing as well as the consuming countries. 
To be sure, part of these gains, for the time being, are used 
to help defray the expenses of operation and maintenance 
of the waterway, not to mention the interest on and 
the amortization of the enormous capital invested. 

The countries most directly benefited in this manner 
are those of the Western Hemisphere. The coastwise 
trade of the United States can now reach the Pacific 
through the Canal, whereas it formerly had to go around 
the Horn or else transship at Gulf ports into various 
transcontinental or trans-isthmian railroads and out 
again. From 7,000 to 9,000 miles are now saved, ac- 
cording to the respective location of the ports served, 
as well as the expensive and wasteful transshipment, to 
say nothing of the reduced expenses due to cheap fuel 
at Panama as compared with the Straits of Magellan. 
These improvements are not without their beneficial 
effects upon shipping, commerce, and even upon trans- 
continental all-rail routes. To preserve a sound com- 
petition between the water traffic through the Canal 
and the transcontinental railroads. Congress forbids 
railroad-owned vessels the use of the Canal in coastwise 
traffic. The trade between the Atlantic coast of North 
America and the Pacific coast of South America and 
vice-versa is being similarly affected. 

To a lesser degree the commercial relations between 
Europe and the west coast of North and South America 



SUEZ AND PANAMA 57 

on the one hand, and between eastern Asia and Aus- 
tralia, on the other hand, come under the influence of 
the Panama Canal. It is true that the saving in time 
grows relatively less important the farther the point of 
origin or destination of shipment is removed from the 
shores of this continent. But the absolute figures in 
these instances are still such as to give the Canal route 
the prefierence in all but a few exceptional cases. 

The "Twilight" Zone," served by both Suez and 
Panama. — However, a different situation arises in the 
case of movements from eastern Asia and Australia to 
Europe and vice-versa, or of shipments from the Atlantic 
coast of' North America to points in the Indian Ocean. 
Here thie "twilight zone," that is, the competitive area 
served by both the Suez and Panama Canals, is reached. 

To determine the boundary line, wWch divides the 
respective spheres tributary to the two great inter- 
oceanic canals, it would not do simply to go 180° east 
or west from New York or Liverpool and call the entire 
territory lying in one-half of the globe Suez territory 
and the other Panama territory. Steamship lines are 
not air lines and do not follow the latitudes. The lay 
of the land, coaling stations, etc., make the actual steam- 
ship lines appear much longer than they are. There- 
fore, only a careful study of actual distances covered by 
steamships to and from various points leads to the proper 
location of the lines of demarkation that form "the great 
divide" between the two traffic zones. Such a study 
may be made from the accompanying chart.* 

iFrom Hearings before House Committee on Merchant Marine 
and Fisheries on Interoceanic Canals.' 



58 



OCEAN SHIPPING 



COMPARATIVE SEA ROUTES FOR FULL-POWERED 
VESSELS 



- - r — 



•W*''*Sf" 



1 "-i 



ffi 









I pis- 

-S3-' I 

!■ inri 



"^ii 



•ssf-3Srr 



t 



M 






fll 



We find that the true equidistant line for Liver- 
pool lies just east of Australia and of Yokohama, while 
the line for New York lies west of the Philippine Islands 
and takes in almost all of Australia. The map on page 59, 
which appeared in a recent issue of the "Panama Canal 
Record," makes the situation clearer. 

It is expected that much of the traffic plying to and 
from this "twilight zone" will patronize both canals, 
in which case trips around the world will become no 
uncommon feat of world-wide shipping. Yokohama used 
to be the terminus of- Far Eastern trade and home- 



SUEZ AND PANAMA 



59 



HOW TIME IS SAVED BY USE OF PANAMA CANAL 













From Panama Canal Record, 

bound steamers used to trace back their courses. Now 
traffic conditions will extend the route across the Pacific 
to pick up the increasing freight from the west coast of 
North America to Europe and will then complete the 
circle.^ 

Reduction of distance means trade expansion. — But 
reduction of distance is only a means to an end. The end 
is trade expansion through increased salability resulting 
from reduced transportation costs. Economically, there- 
fore, the most important effect of the opening of the 
Panama Canal will probably prove to be the fact that 
the great industrial centres of the northeastern United 
States, stretching from New England as far south as 
Charleston, are brought nearer to many important 
markets, such as Siberia, Japan, China, Australia, New 
Zealand, Chile, Peru, etc. It will expand the field in 
w<hich the products of that large area can be sold in 

lAs this book is going to press, this expectation has become 
reality in several instances, a number of shipping companies having 
inaugurated services clear around the globe. 



60 ' OCEAN SHIPPING 

competition with the wares offered by their powerful 
rivals. 

In the same way Pacific industries will be able to 
strengthen their foothold in Europe. Thus the canal will 
materially aid in the national movement for greater pros- 
perity through greater exports. But the effect will be 
reciprocal. Importation of goods to be bought in ex- 
change for these materials will be facilitated to the same 
degree. This is of vital importance, for in the long run 
export expansion is impossible without a corresponding 
increase in the imports. Indeed the experience of all 
creditor nations — and the United States has become the 
World's creditor nation — has been a relative slowing up 
of exports as against a rapid increase of imports. 

Shorter distances mean larger tonnage supply. — One 
very important by-product of all short cuts in shipping 
routes is easily overlooked, namely, increased tonnage 
efficiency. We referred to it in the discussion of the 
Suez Canal. To the extent that the trip around the 
Horn is longer than that around the Cape, the tonnage 
set free by the opening of the Panama Canal would be 
greater than that released by the Suez Canal (other 
things being equal). Of course, as was pointed out be- 
fore, increased trade rapidly absorbs the resulting sur- 
plus and renders the effect on tonnage rates almost un- 
, noticeable. Possibly under normal conditions of tonnage 
supply a slight reduction of freight rates would partly 
reveal the effect. 

The dawn of the Pacific age. — ^The fate of the Panama 
Canal is inseparably linked up with that of the Pacific 
Ocean; For the present the Suez Canal taps the world's 
oldest areas, connecting the two most densely populated 



SUEZ AND PANAMA 61 

continents. But there are those who believe that the 
center of gravity — economically and politically speaking 
— is gradually shifting to the Pacific. One hears of the 
"dawn of the Pacific age," and the dominion of the 
Pacific is referred to as the problem of the Twentieth 
Century. Lord Palmerston said, "To control the Pacific 
is to control the world." Similar expressions are ac- 
credited to Napoleon, Seward, the Marquis Ito and 
others. Historians speak of the westward march of 
civilization, showing bow the center of gravity has 
shifted from the Mediterranean to the Atlantic ; and now 
prophetic economists add that it will move from the 
Atlantic to the Pacific. "The star of empire will not 
stay its progress westward because of an ocean, which 
no longer exists for thought or speech, and Which will 
always be necessary for commerce. The East which is 
the terror of Europe is the West to us, and we are as 
necessary to it as it is to us in the economic and com- 
mercial developments which follow all great wars) and 
will follow this in proportion to its size." ^ 

It is possible that the European War has accelerated 
this shift. Great men, such as Frank A. Vanderlip, think 
so. They argue this way : American war loans to Europe 
have piled up an enormous trade balance in favor of 
this country. If Europe is to pay her debts, the trade 
balance will have to be reversed, unless America finds 
new markets which can absorb her exports. Asia alone 
can supply these markets. An industrialized China can 
readjust the dislocated economic situation of the world. 
Or to quote from a cablegram sent by Mr. Vanderlip 

* From an editorial entitled "The Westward Look," in New York 
Times. May 16, 1920. 



Q. OCEAN SHIPPING 

from Tokio during his visit to Asia in the Spring of 
1920: "The war's great loss will be more than com- 
pensated if the East is organized industrially. If Amer- 
ica could succeed in breaking down the existing distrust 
and prejudices it would be rendering the greatest service 
to the world — 'greater than mere financial co-operation." 
And the New York Times adds editorially: "America 
was summoned to redress the political balance of Europe 
and has now to redress the economic balance of the world 
through Asia." 

The Panama Canal is bound to benefit by such de- 
velopments. 

REFERENCES 

Bennett, T. E. History of the Panama Canal. (1915). 

Hartley, Sir Charles. History of the Engineering Works of the 
Sues Canal. (London, 1900). 

HUEBNER, G. G. Economic Aspects of the Panama Canal in Ameri- 
can Economic Review, December, 191S. 

Hutchinson, L. The Panama Canal and International Trade Com- 
petition. (1915). 

Johnson, E. R. Measurement of Vessels for the Panama Canal, 
(1913). 

Panama Canal Traffic and Tolls. (1912). 
The Panama Canal and Commerce. (1916). 

Johnson and Huebner. Principles of Ocean Transportation. Chaps. 
VI. and VII. (1919). 

Panama Canal. Official Handbook. (1915). The Panama Canal 
Record. (Weekly). Annual Report. 

Sibert and Stevens. The Construction of the Panama Canal. (191S). 

Suez Maritime Canal Company, (Paris). Annual Financial State- 
ment. Annual Report. Bulletin Decadaire. Le -Trafic du Canal 
en 1919. (1920). 
Rules of Navigation. (Edition, January, 1921). 



PART II 
PORTS AND TERMINALS 



63 



CHAPTER IV 
OCEAN TERMINALS 

Good terminals indispensable to efficient transporta- 
tion. — It is an elementary traffic law that the capacity of a 
transportation line depends upon the capacity of its terminal. 
This is true of railroads and equally so of shipping. The 
terminals of ocean traffic are the ports. Port efficiency, 
therefore, is vital to efficient ocean transportation. It is 
of a double nature; either organic or functional, that is 
to say, it is either a matter of port construction, or of 
port operation, or of both combined. Port construction 
affects the draft and length of the ships which may use 
it; on port operation depends their "turn-'around." And 
since, in the case of the ocean carrier, economy depends 
upon size, i. e., the carrying capacity available, and also 
on the frequency of sailings or the number of trips the 
vessel makes, we see that port construction and opera- 
tion can through efficiency add to, or, through ineffici- 
ency, detract from the available tonnage supply as effec- 
tively as can a Hog Island or a submarine. 

The war has laid bare this truth and has put its finger 
on the Achilles Heel of the national and international 
transportation system. The world, hungry for ships, 
learned how to accelerate the "turn-around" by providing 
better and more efficient port operation. Staggering un- 
der the load of the high cost of living, such as only a 
world war can produce, it realized the inefficiency and 
the ensuing costliness of dock operation. The medieval 
drayage system, the antiquated lighterage system, the 

65 



66 OCEAN SHIPPING 

appalling lack of machinery, — all these defects resulting 
in considerable "frais parasites" (parasitic expenses) of 
terminal handling in the face of serious labor problems 
and rising prices, grew in relative importance so that at 
last they were discovered by the general public. 

Grosvenor M. Jones in his "Ports of the United 
States'" estimated that the average expense of hauling 
a ton of freight 240 miles in the United States was 74 
cents, as against 75 cents for hauling the same ton at 
the terminals from station to consignee. In the case of 
a shipment of package freight from New York to Phila- 
delphia, the railroad cost for the 90 mile haul was said 
to be but a fraction — about 1/14 — of the terminal 
handling expenses at the two big cities. Also, it is 
claimed that it is cheaper to ship goods 1,320 miles from 
Boston, Mass., to Havana, Cuba, than from one pier to 
another in Boston harbor.^ These figures tell the story 
and reveal the problem, but it is the solution which in- 
terests us here. 

Port terminology. — A good step forward was made 
when W. J. Barney, Secretary of the American Associa- 
tion of Port Authorities, succeeded in having a number 
of definitions of port terms adopted, thereby clarifying to 
some extent a rather neglected terminology. We give 
here some of the most important definitions : 

Wharf — general term for a landing place for vessels 

and cargoes. 
Pier — wharf structure projecting into a stream or 

fairway. 

1 See Grosvenor M. Jones, Ports of the United States. Dept. 
of Commerce, • 1916. 

2 See R. S. Mac Elwee, Ports and Terminal Facilities, p. 5. 



OCEAN TERMINALS 67 

Slip — open water spaces or docks between adjacent 

piers. 
Quay — wharfs parallel to' or lying along the shore. 
Dock — terminal in which the slips or basins adjacent 

to the wharves are provided with locks and 

gates. 

A port should be distinguished from a harbor. The 
latter lies in a sheltered body of water of sufficient depth 
to enable a ship to take refuge therein from the stormy 
high seas. 

A port is a harbor plus terminal facilities, i. e., arrange- 
ments either mechanical or otherwise, which facilitate 
the transfer of passengers and goods.^ 

Different types of harbors. — There are different types 
of harbors. The geographer distinguishes five types on 
the basis of their physical nature. Harbors may, in the 
first place, be formed by drowned valleys — like those of 
Norfolk, Baltimore and Buenos Aires, where entire 
plains were submerged; or like Rio de Janeiro, New 
York, Vancouver and Seattle, where uneven land sur- 
faces cause a rather complicated water surface; or like 
San Francisco, where a whole mountain range has been 
depressed and a former mountain pass is now "the 
Golden Gate," the gateway of the harbor. Frequently 
rivers drain into these drowned valleys and deposit sand 
and debris near the entrance to the sea, thus rendering 
constant attention to the channel necessary. 

Barrier harbors, in the eyes of the casual observer, 
seem to be somewhat similar to the foregoing, but they 
owe their existence to wave and tidal currents which 

1 See R. S. MacElwee, op. cit 



68 OCEAN SHIPPING 

have developed barrier beaches or bars along a given 
stretch of coast line. Ships find a quiet water anchorage 
back of the sand ridge, as in Provincetown, Galveston, 
Danzig and Durban. The constant shifting of the sand 
makes maintenance difficult. 

Historical reasons largely account for the location of 
many harbors which are a considerable distance up 
streams. If present conditions alone were to determine 
the location, the number of river-ports would be con- 
siderably smaller. As it is, some of the world's most 
renowned ports belong to this group. 

London: About 67 miles up the Thames. 

Hamburg: About 67 miles up the Elbe. 

Bremen: About 54 miles up the Weser. 

Antwerp: About 45 miles up the Scheldt. 

New Orleans: About 106 miles up the Mississippi (no-w short 

cut). 
Philadelphia: About 61 miles up the Delaware (102 miles from 

the ocean). 
Baltimore: About 11 miles up the Patapsco (151 miles from 

the ocean). 
Portland, Ore.: About 112 miles from the Pacific Ocean. 

The millions which are spent on river improvements 
to enable these long established emporia to hold the 
trade they won in the days when sea-going craft could 
readily reach their wharves and warehouses are not a 
useless tribute to the past; they are a paltry sum when 
compared to the cost that a complete shift of trade 
centres would involve. 

But not all ships can call at these ports; a few of 
the ocean greyhounds are kept out by their excessive 
draft. For these, special docks have to be provided at 



OCEAN TERMINALS 69 

the mouth of the river, such as at Cuxhaven (Hamburg), 
Bremerhaven (Bremen) and Tilbury (London). It is 
easier to bring to them by rail or otherwise the passen- 
gers and the relatively small amount of cargo that these 
giants carry, than to deepen the river to a point that 
would accommodate them. This question of harbor im- 
provement will be given further attention in connection 
with a discussion of the economies of ship size. 

Rivers and tides. — It is not the length of a river which 
determines its power to create great seaports. The Mis- 
sissippi, "Father of Waters," has a natural depth over 
the bar of only 13 feet. The Danube, which drains 316,- 
000 square miles, has a natural depth of from only 7 
to 12 feet. The Nile below Cairo is navigable only with 
difficulty. Not the length of the stream but the height 
of the tide counts. Thus the Mersey, an insignificant 
river, makes Liverpool a great seaport, owing to a tidal 
rise of 27 feet. London and New York are likewise 
aided. The significance of the tide is admirably stated 
in the following quotation:^ 

"If the moon were suddenly to be struck out of ex- 
istence, we should be immediately apprised of the fact 
by a wail from every seaport in the kingdom. From 
London, from Liverpool, from Bristol, we should hear 
the same story — the rise and fall of the tide had almost 
ceased. The ships in dock could not get out; the ships 
outside could not get in; and the maritime commerce 
of the world would be thrown into dire confusion." But 
that does not mean that a high tidal rise is in itself a 
desirable characteristic of a great seaport. It is better 

iSee Gregory, Keller and Bishop, Physical and Commercial 
Geography, p. 13. 



70 OCEAN SHIPPING 

than an impassable river, but better yet is a sufficiently 
deep harbor without any excessive difference between 
ebb and flow. , 

Less important types of harbors are the coral reef 
harbors, such as Ireland Island, Bermuda. Such har- 
bors rarely become great ports for they lack the all- 
important hinterland. They are apt to make valuable 
coaling stations and are of strategic value. A crater 
harbor, Lyttelton, N. Z., deserves mention more as a 
geographical curiosity than because of its commercial 
significance. 

Some important ports owe their existence entirely to 
artificial works — the cutting of a canal like that at Port 
Arthur, and at Houston, Texas, or the building of a 
breakwater as at Dover, England, and at San Pedro, 
Cal., or the dredging of insignificant streams such as the 
Clyde at Glasgow. 

Functions of ports. — ^We see that men have created 
ports where nature provided no harbors and again that 
wonderful harbors, such as some formed by islands, are 
practically deserted. This simply proves that it takes 
more than a good harbor to make a great port, and 
that above all a traffic-creating hinterland is necessary. 
The function of a port is to facilitate the exchange of 
goods and passengers between ocean and land carriers. 
That is the commercial function; it deals chiefly with 
through freight. This through traffic attracts industries 
because of the opportunity of getting raw materials 
cheaply and because of the proximity to a large aggre- 
gation of consumers. We may term this the industrial 
function ; it pertains mostly to local freight. A third func- 
tion which is attracting much attention to-day is the 
creation of entrepot or re-export trade. But this is 



OVEAN TERMINALS 71 

more in the nature of a by-product. It flourishes as 
an adjunct to the other functions, but can hardly be 
thought of as existing by itself. The greatest port will 
be that one which is able to function in these different 
ways with the minimum of friction and the maximum 
of dispatch. 

Importance of physical contact between rail and ship. 
— The commercial port requires above all, the best pos- 
sible physical contact between the system of ocean liners 
and the multitude of tramps on the one hand, and the 
railroad net, focusing at .the port and supplemented 
by inland waterways, on the other. This physical con- 
tact may be brought about in many different ways. 
Each port, according to its physical peculiarities, has a 
different problem to solve, but in each case the degree 
of perfection attained will depend upon a scientific co- 
ordination of the existing transporta.tion facilities — ^both 
on land and on water. 

The ideal port is open to ships of any size at any 
time. It is surprising how few ports qualify in this 
respect. Ships of the type of the Leviathan or the 
Aquitania, when fully loaded, can safely proceed to only 
one port on the Atlantic Coast of the United States — 
New York. Boston could receive them at hig'h tide 
only, and Portland, Newport News and Norfolk only 
when they are not carrying full cargo. The Pacific ports 
of San Francisco, Seattle, and Tacoma answer to the 
above description of an ideal port, as these harbors have 
sufficient depth for any ship. 

Harbor depth and draft of vessels. — While this coun- 
try has relatively few ideal ports, it nevertheless has 
the most comprehensive and uniformly developed sys- 
tem of up-to-date ports in the world. 



72 OCEAN SHIPPING 

The controlling or minimum depth at mean low water 
of the entrance and harbor channels at the following 
ports on the seaboard on June 30, 1914, as reported by 
the Chief of Engineers, United States Army, together 
with the mean range of tide and the maximum usable 
depth at high tide of the entire channel are s'hown in 
the following table :^ 

Minimum Mean range Maximum 
Ports depth. of tide.* depth. 

North Atlantic feet feet feet 

Boston, Mass 35.00 9.50 44.50 

Bridgeport, Conn 22.00 6.50 28.50 

Fall River, Mass 22.00 4.75 26.75 

Hartford, Conn 12.00 1.00 13.00 

New Bedford, Mass. . . . 25.00 4.25 29.25 

New Haven, Conn 20.00 6,00 26.00 

New London, Conn. ... 23.00 2.50 25.50 

New York, N. Y 40.00 4.50 44.50 

Philadelphia, Pa "30.00 6.00 36.00 

Portland, Me 30.00 9.00 39.00 

Providence, R. I =25.00 4.50 29.50 

Wilmington, Del ■> 15.00 6.00 21.00 

South Atlantic 

Baltimore, Md 35.00 1.00 36.00 

Brunswick, Ga 21.50 7.00 28.50 

Cape Charles, Va 12.00 2.50 14.50 

Charleston, S. C 28.00 5.00 33.00 

Jacksonville, Fla =24.50 0.80-4.50 25.30-29.00 

Newport News, Va 35.00 2.50 37.50 

Norfolk, Va 35.00 2.75 37.75 

Richmond, Va 18.00 2.50-4.00 20.50-22.00 

Savannah, Ga 26.00 6.10-6.50 32.10-32.50 

Washington, D. C 24.00 3.00 27.00 

Wilmington, N. C 26.00 2.50 28.50 

*From Grosvenor M. Jones, Ports of the United States. De- 
partment of Commerce, 1916. 



OCEAN TERMINALS 73 

Guilf of Mexico 

Galveston, Tex 30.00 1.25 31.25 

Houston, Tex 25.00 25.00 

Mobile, Ala 26.00 1.50 27.50 

New Orleans, La 31.00 31.00 

Pensacola, Fla 31.00 («) (e) 

Port Arthur, Tex 26.00 26.00 

Tampa, Pla 24.00 2.50 26.50 

Texas Gty, Tex 25.00 25.00 

Pacific 

Los Angeles, Cal 30.00 5.00 35.00 

Oakland, Cal 23.70 4.50 28.20 

Portland, Oreg. <:28.00 7.00 35.00 

Port San Luis, Cal 20.00 3.75 23.75 

Sacramento, Cal 7.00 7.00 

San Diego, Cal 30.00 5.00 35.00 

San Francisco, Cal f 40.00 3.75 43.75 

Seattle, Wash (=) (e) 

Stockton, Cal 6.00 3.00 9.00 

Tacoma, Wash («) 13.00 (•) 

a As reported by the Coast and Geodetic Survey. 

b Being dredged to 35 feet. 

c Being dredged to 30 feet. 

d Being dredged to 21 feet. 

e Deep enough for any draft. 

f In north channel around the bar and from 30 to 60 feet witHn the harbor. 

Great Britain is less favorably situated. This was 
brought out in an investigation carried on by the Domin- 
ions Royal Commission. This commission recom- 
mended, along with many other proposals: 

"The establishment by government ownership or sub- 
sidy, of several great lines of steamships connecting the 
ports of the Empire, and an inter-imperial scheme of 
deep-harbor development to accommodate the ships, 660 
ft. long with 38 ft. draft, calculated to have the ultimate 



^^ OCEAN SHIPPING 

practical economies of freight transportation which 
wtould make tariff discrimination unessential in imperial 
preference." * 

It was found that of England's ports, only London, 
Liverpool and Southampton are able to take these deep- 
keeled vessels now, at high water. Other British deep 
harbors are Singapore and Hongkong in the Far East; 
Melbourne, Sydney and Hobart in Australia; Capetown 
and Durban in South Africa (these last two would need 
minor improvements) ; Halifax, Quebec, Vancouver and 
Prince Rupert in Canada; and Bermuda and Tahiti on 
the Panama route from the United Kingdom to Aus- 
tralia. But it should be understood that vessels of 38 
feet draft are as yet rare exceptions. A port that pos- 
sesses a 25-foot channel satisfies the prdinary shipping 
demands. 

Other important physical requirem,ents of ports. — The 
latest data on the controlling depth of water at United 
States ports were compiled by the Secretary of the Ports 
and Harbors Facilities Commission of the United States 
Shipping Board, and were published in 1919 at the re- 
quest of the Senate Committee on Commerce. This 
report is based principally on the answers received to a 
questionnaire which was sent out to 27 leading ports. 
These answers cover the important physical require- 
ments of a modern port and may therefore be used as 
a basis of discussion. 

The list of items covered is as follows; 

(1) Controlling Depth of Water. 

(2) Berthing Capacity in Linear Feet. 

^ See The Americas, February, 1918, p. 2, 



OCEAN TERMINALS 75 

(3) Names of Railroad Lines Serving the Port. 

(4) Dry Docking Facilities. 

(5) Anchorage Area Available within Harbor. 

(6) Fresh Water for Boiler and Drinking Purposes. 

(7) Quantity and Characteristics of Electric Cur- 
rent Available. 

(8) Coaling Facilities. 

(9) Fuel Oil Facilities. 

(10) Crane and 'Derrick Facilities. 

(11) Steamship Lines at Present Using the Port 
Regularly.' 

(12) Grain Elevators and Storage Facilities. 

Of course, the facilities of the port of New York, which 
is in a class by itself, could hardly be satisfactorily cov- 
ered under these headings. On the other hand, many 
smaller ports do not possess all of the enumerated facili- 
ties. But the list serves to show the essential ' pre- 
requisites. 

In a comprehensive government report^ we read : "In 
general there are four fundamental requirements of all- 
water terminals: (a) good wharves, (b) warehouses and 
storage facilities, (c) mechanical appliances for trans- 
shipment of freight, (d) (this is highly important, though 
not always practicable) belt-line railway connections 
with adjacent railroads and industrial concerns so as to 
co-ordinate water and rail transportation and connect 
with local production and distribution." "Good wharves" 

1 Report of Commissioner of Corporations on Transportation by 
Water, Part III, Water Terminals, 1910. 



76 OCEAN SHIPPING 

is taken here in the general sense of good landing fa- 
cilities and ought to include piers, wharves, docks, and 
dolphins.* The importance of warehouses and storage 
facilities, i.e., primarily, transit sheds, arises from the 
impossibility of moulding commerce into a constant 
stream of uniform volume. Space must be provided 
which can hold the overflow when the influx of goods 
into a port overtaxes the outgoing transportation facili- 
ties and exceeds the local demand. The abuse of rail- 
road cars for storage purposes is one of the defects of 
badly co-ordinated ports. The question of cargo- 
handling equipment will be taken up at length in an- 
other chapter. 

Bush Terminal, an ideal industrial port. — ^An ideal 
industrial port is the famous Bush Terminal in South 
Brooklyn, New York.^ A detailed description of this 
extraordinary mechanism reveals fully and clearly what 
a scientifically organized and mechanically perfect ter- 
minal can do in the line of facilitating the exchange of 
commodities, thus fostering -industrial growth. 

The Bush Terminal is a city in itself. It is an indus- 
trial community with, at present, about 300 manufac- 
turers and jobbers as tenants, located in model loft 
buildings. Through this terminal city passes one-fifth 
to one-fourth of New York's foreign trade to-day, esti- 
mated for the Bush Terminal alone at one billion dol- 
lars in value. The equipment includes eight piers ac- 
commodating not less than 25 steamship lines. Its ware- 

1 Dolphins are mid-basin mooring posts, the use of which grfeatly 
enhances the berthing capacity of docks. 

2 The following paragraphs are based upon material supplied by 
the Bush Terminal Company. 



OCEAN TERMINALS 77 

houses serve above 2,000 customers annually and hold 
a good percentage of New York's raw material imports : 
Egyptian and Indian cotton, copra, hides, sugar, jute, 
sisal, coflFee, palm-oil, etc. Ocean carriers, warehouses 
and factories are thus brought into the closest possible 
physical contact. 

But that is not all. The Bush Terminafl Railroad with 
yardage space for over 1,000 standard freight cars, 30 
miles of railroad track, train trackage to every build- 
ing and every pier, and the Bush fleet of tugs, floats 
and lighters connect with any pier or ship in New York 
harbor. The Bush equipment of horse and motor trucks 
maintain a regular collection and delivery service 
throughout New York and Brooklyn. 

Functions of the Bush Terminal Company. — More- 
over, the Bush Terminal is terminal agent for aH rail- 
roads entering New York. Except in a few instances, 
the flat New York rate (the same that applies to all 
stations in Manhattan) applies to freight received or 
delivered at the Terminal. Under this system the tenant 
shipper of L. C. L. freight delivers his goods to the 
freight elevator that stops at his floor and gets from 
the terminal company a bill of lading to destination. 
The Bush Terminal Company receives this small ship- 
ment along with hundreds of others from other manu- 
facturers or warehousing tenants from steamships dock- 
ing at its piers, from Brooklynites who use the public 
freight station it maintains, and consolidates all this 
traffic into through cars either on the individual ship- 
ping platform or at a transfer which is maintained for 
that purpose. The insistent demand on the part of the 
tenants prompted the Terminal Company to erect a 



7S OCEAN SHIPPING 

modern cold-storage plant witliin the precincts of the 
Terminal City, enabling the company to extend ter- 
. minal services and facilities to a large number of ship- 
pers of perishables, who, previously, had not been able 
to take advantage of them. 

Since the return of the Terminal to private commer- 
cial use, after having served the United States Govern- 
ment as its main domestic supply and shipping base 
during the war, a new service has been instituted in a 
new service building in South Brooklyn. Here 'the Ter- 
minal company is prepared to act at the same time in 
the capacity of a railroad terminal agent, seaboard 
broker, warehouseman, forwarding agent and carter, 
though the carting is largely eliminated. Even collec- 
tions are handled if it is so desired. This service is 
for non-resident manufacturers who wish representatives 
in New York for their domestic business in that im- 
portant market of 20,000,000 buyers (within 2,200 miles 
of City Hall), or for their exports, or for both. The 
best illustration that can be given of this point is that 
of the Holeproof Hosiery Company. The distribution 
of the products of this company was undertaken, which 
involved the receipt of the manufactured wares in cases 
containing many dozens, the placing in stock, the re- 
packing by sizes and colors into individual packages of 
varying amounts, the filling of small merchandizing 
orders, the packing and shipping, the stock account- 
ing, etc. 

The Bush plan is the successful application of the 
co-operative principle to manufacturing and shipping. 
It reduces the manufacturing overhead as well as the 
-shipping expense to a minimum by rendering possible 



OCEAN TERMINALS 79 

■ the fullest use of the available facilities. It is, as yet, 
the last word in terminal development.^ 

Store-door delivery. — The best proof of the merits of 
the case is found in the widespread application of this 
principle outside of the Terminal City. The powerful 
movement for store-door delivery is nothing but co- 
operative carting. That particular field of terminal 
operation — carting — is probably the most airchaic and 
wasteful of any. Dray delivery is a necessary evil and 
should be reduced to the minimum. It is most wasteful 
where a "laissez-faire" policy is pursued and draying 
is performed by a number of private concerns freely 
competing with each other. The waste is due less to 
the inefficiency of the vehicle itself than to the loss from 
idle time — ^while waiting in .traffic congestion, or to be 
loaded or unloaded or from idle space, owing to under- 
loading and to criss-cross carting. All of these evils 
are fully realized and manifold suggestions are under 
discussion to alleviate them. The waste increases with 
the size of the city and therefore New York and Chi- 
cago are the worst sufferers and at the same time are 
most desperate in trying to find a remedy for the situa- 
tion. Chicago is working out a union terminal system 
of substations by which, through a reduction of hauling 
distances, the drayage expense would be cut in half. 
The same principle applied to New York would mean 
a system of union car float substations distributed at 
convenient points about the harbor, such as suggested 
by Mr. Irving T. Bush. 

On land the saving could be brought about by the 

1 The latest news about Bush Service tells of the erection of a 
large Terminal Building in London. 



80 OCEAN SHIPPING 

Store-door delivery system, which means that the dray- 
age is to be* absorbed by the carriers and that all con- 
signments of C. L. or L. C. L. freight are to be handled 
immediately upon arrival and delivered to the store- 
door of the consignee. During the war, the Federal 
Railroad Administration worked out the details of the 
scheme. A drayage director was to organize the entire 
process on the basis of efficiency and elimination of 
waste. Elaborate rules had been worked out covering 
the details of the plan, based largely on the suggestions 
of a Committee of the Public Service Commission and 
approved by Mr. McAdoo as Director-General of the 
Railroads. 

The idea of store-door delivery is by no means a new 
one. In 1909 the Pennsylvania Railroad inaugurated, 
at its own expense, a system of direct consignment in 
Baltimore as a means of meeting water competition. 
A similar system had been in operation in Washington 
for many years. But the Inter-State Commerce Com- 
mission ruled that the railroad had no right to discrimi- 
nate in favor of some cities against others. The ab- 
normal congestion at the port of New York, due to 
immense war traffic, especially during the winter of 
1917-1918, resulted in an effort to clear the piers and 
rolling stock for purely transit purposes, by abolishing 
the abuse of treating them as part of the port's ware- 
housing facilities. Formerly a few days' time was al- 
lowed to save the necessity of actually storing goods' 
which could not be immediately placed on ships or re- 
moved. But such warehousing on piers and sidings is 
an obvious misuse of facilities meant for an entirely 
different purpose and cannot ibe tolerated when the trans- 



OCEAN TERMINALS 81 

ference of goods requires every spare foot of available 
space. An extension of warehouse facilities would be 
necessary if the scheme were put into operation. The 
arrriistice came before the plans were put into opera- 
tion and, although much congestion continues to .exist, 
there seems no immediate prospect of seeing the scheme 
of store-door delivery adopted in New York. 

REFERENCES 

Bush Terminal Company. Various Publications. 

Gregory, Keller and Bishop. Physical and Commercial Geography. 
Chap. I. (1910). 

GooDE, J. P. The Development of Commercial Ports. (1908). 

Hough, B. O. Ocean Traffic and Trade. Chap.' IV. (1915). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
X. (1919). 

KiRKALL.-, A. W. British Shipping, Book IV. (1914). 

Mac El wee, R. S. Ports and Terminal Facilities. (1918). 

Owen, D. Ocean Trade and Shipping. Chap. I. (1914). 

Smith, A. R. Port of New York Annual, Second Edition (1921). 

Smith, J. R. The Organisation of Ocean Commerce. Chap. XIII. 
(1905). 

Industrial and Commercial Geography. Part II. Chap. XIII. 
(1913). 

United States. Acting Secretary of War. Water Terminals and 
Transfer Facilities (House Doc. No. 226, 63 Cong. 1 Sess., 1913). 
Bureau of Foreign and Domestic Commerce. Ports of the 
United States. (Miscellaneous Series No. ZZ, 1916). 
Commissioner of Corporations. Report on Transportation by 
Water in the United States, Part III, Water Terminals. (1910). 
Shipping Board, Port afld Harbor Facilities Commission. Twenty- 
seven Ports of the United States. (1919). 



CHAPTER V 

ENTREPOT CENTRES AND FREE PORTS 

Nature of entrepot trade. — ^According to the definition 
given in the preceding chapter, the third function of 
seaports is to distribute foreign goods to foreign coun- 
tries. That phase of commerce is known as entrepot 
or intermediary trade. The port handling this trade 
is interposed between a producing and a consuming 
country just as a middleman stands between seller and 
buyer. Such trade is supplementary to that which falls 
to a city because of its own consuming power and 
its relation to a -strong hinterland. Thus London, the 
greatest consuming centre of Europe, is, at the same 
time, the greatest entrepot of the world, although the 
war has deducted much from her former influence. As 
the capital of the British Empire, she for decades pos- 
sessed the most complete net of connections throughout 
the world, which is the first prerequisite of a great 
entrepot. 

History of entrepot trade. — In days gone by entrepot 
trade played a relatively more important part than it 
does to-day. The commerce of Venice, Bruges, Lisbon, 
Antwerp and Amsterdam during the height of their 
power was primarily of this type. Several reasons ac- 
count for this fact. In the first place, the political map 
was cut up into innumerable small units, so that much 
trade appeared as entrepot, which would not be counted 
as such to-day. In those days entrepot' trade was monopo- 
listic and the monopoly was backed by force of arms. 
The entrepot center known as "the staple" owed much 

82 



ENTREPOT CENTRES AND FREE PORTS 83 

of its prominence to royal "fiat." Moreover, the foreign 
trade of that period was confined to the exchange of 
goods between the Orient and the Occident and con- 
sisted of just such commodities as are best adapted to 
this kind of trading— non-perishable valuables of small 
volume. Entrepot trade, being indirect in most cases, 
involves circuitous routing and detours which are too 
expensive when cheap bulk goods are carried. The small 
quantities of spice, silk, tea and curios which filled the 
holds of the small sailing craft could well stand an extra 
trip of a few days. This counts less the longer the 
entire voyage. Therefore, the more remote the origin 
and destination of the traffic, the stronger is the hold 
upon the trade of the entrepot. Finally, the demand 
for Oriental products was very limited and few locali- 
ties could absorb whole shiploads at a time. Hence 
these intermediary distributing centres sprang up, which 
became central markets for as wide a territory as their 
prowess could hold tributary. 

Volume of entrepot trade of different countries. — It 
is estimated that more than $4,000,000,000 worth a year 
of all the commodities that move around the world in 
commerce is handled at least twice, going from the place 
of production to some of the great merchandising ports 
of another.country, to be there resold and exported again 
to the country where they are consumed. The bulk 
of the merchandising trade is carried on in the few 
ports grouped around the British Channel, with London 
as the leader. The entrepot trade of this country has 
assumed large proportions only in recent years, partly 
owing to the temporary dislocation of merchandising 
commerce hitherto established. 



84 OCEAN SHIPPING 

The following data, which are taken from The Americas/ 
March, 1915, referring to the last years before the war, 
give an interesting comparison of English, German and 
American re-export trade: 

"England's total foreign commerce, including its import and 
re-export of foreign and colonial goods, averaged $6,121,499,319 
a year from 1909 to 1913, and $5,036,973,264 from 1904 to 1908. 
The average of re-exports was $498,431,527 from 1909 to 1913, 
and $393,827,376 from 1904 to 1908. Exports of English prod- 
ucts averaged $2,220,763,559 and $1,760,406,839. The re-export 
commerce, counting the value of goods only once, grew from 
9.2 per cent, of the total of all the other commerce to 9.7 per 
cent., and from 22.3 per cent, of the value of exports of English 
products to 22.5 per cent. 

"Of the goods moving seaward out of London during the five 
years ended with 1912, re-exports averaged $243,635,267 yearly 
against $380,202,981 worth of English exports. In the previous 
five years it was $202,222,106 worth of traded products against 
$316,207,925 of the produce of English industry. The statistics 
of the port of Liverpool show an annual average of $127,395,810 
in re-exports against $682,599,168 of English products in the 
latter five-year period and $98,526,556 in re-exports against 
$692,964,494 direct exports in the p«-eceding five-year period. 
London's re-exports rose in value from 63.9 per cent to 64.1 
per cent of the exports. Liverpool's rose from 14.2 per cent 
to 18.6 per cent. 

"The trade figures of the German Empire do not give such 
details as do the British statistics. But the "special" exports 
are ordinarily subtracted from the general to give German 
re-exports. There are also special imports. German sta- 
tistics for 1907-1911 show average yearly re-export trade of 
$153,672,832, against general exports of $1,841,373,792 and a 
total commerce of $4,086,820,058. In the 1902-6 period it was 

* This publication of the National City Bank of New Yoft through 
various articles has contributed to the literature on this subject and 
throughout this discussion we have freely drawn from this valuable 
source. 



ENTREPOT CENTRES AND FREE PORTS 85 

$90,812,757 against general exports of $1,383,285,763, and a gen- 
eral commerce of $3,052,527,378. Thus Germany's entrepot trade 
grew from 6.5 per cent, of the exports to 8.3 per cent., and 
from 2.9 per cent, of the whole commerce to 3.7 per cent. 

"These statistics of England and Germany show that this 
kind of commerce is growing with and a bit faster than their 
direct exchange of products. It should be remembered that 
for years they haye had highly developed banking facilities 
and merchant navies providing the world with direct lines of 
transportation to them. 

"The re-export trade of the United States is now exceedingly 
small. In 1913 it aggregated $37,377,791, only V/z per cent, of 
all exports and 7/i per cent, of all the country's commerce. A 
large part of it was "trade" only to the extent of passing across 
the country in transportation. It has been actually decreasing 
in proportion to the whole trade. The largest single class of 
products re-exported was fruits and nuts, aggregating $4,800,000. 
There was $4^291,410 worth of chemicals and $4,476,379 worth 
of rubber re-exported. In 1909 we re-exported $1,145,229 worth 
of coflfee, but this trade had dwindled to less than $500,000 in 
1913." 

This trade has grown in value during the five years 
from 1914 to 1918 from $35,000,000 to $81,000,000. How- 
ever, when compared with the increase of total exports 
from two billion dollars in foreign merchandise exported 
in 1914 to the five billion dollars iri 1918, we see that 
the relative importance of the American re-export trade 
has by no means increased, but more likely decreased. 

Relative decline and diffusion of entrepot trade. — Rela- 
tively speaking, entrepot trade is on the wane and the 
day of the world entrepot has passed. The explana- 
tion for this phenomenon is a simple conclusion drawn 
from the foregoing. In the first place,' monopolies en- 
forced at the point of a gun are no longer in vogue. The 
nature of trade has also changed. Instead of small 



86 OCEAN SHIPPING 

cargoes of luxuries the fleets of to-day are filled with 
heavy bulk, material. It was stated that roundabout 
routes, involved in entrepot trade, counted little in for- 
mer times because, compared with the value of the 
cargo, the cost of transportation was relatively small. 
That is so no longer. The rapid growth of population 
in many countries has scattered the demand, with the 
result that /nore and more trading centres have become 
independent of the entrepot. We saw how Marseilles, 
Genoa, Trieste, etc., emancipated themselves from Lon- 
don's influence as a result of the opening of the Suez 
Canal. The improvement of means of communication 
has also contributed to this process of diffusion. 

Not only did London, as the foremost entrepot centre, 
have to lose some of her entrepot trade because it was 
replaced by direct trade, but she also had to give up 
part of her merchandising commerce to rival entrepot 
centres such as Hamburg, Antwerp, Amsterdam, Copen-. 
hagen and others. It now seems that the Scandinavian 
cities will become important entrepot centres for the 
Baltic and Russian trade, much of which was controlled 
by Hamburg before the war. The war, compelling short- 
cuts wherever possible, has accelerated the relative de- 
cline of entrepot trade. 

Emphasis should be placed upon the fact that the 
decrease of this trade is relative only. The absolute 
figures are probably greater to-day than ever before be- 
cause of the greater value and volume of the world trade 
altogether. 

London's benefits derived from entrepot trade. — To 
estimate the significance of entrepot trade, it is best to 
study what it has done for London, the greatest world 



ENTREPOT CENTRES AND FREE PORTS 87 

entrepot centre of modern times. That it has greatly 
added to the total volume of foreign business transacted 
in London is sufficiently proved by the foregoing statis- 
tics. This additional business means additional profits 
to the many branches of the great merchant community 
and, indirectly, to the city-at-large, thus providing a 
living for a goodly proportion of London's vast popula- 
tion. It adds to the profits of the merchant as well as 
to those of the bargeman, warehouseman, banker, indem- 
nity broker and speculator, to name but a few of the 
long list of those who, in some way or other, directly 
participate in the community exchange. 

The indirect advantages are, if possible, still greater. 
Without the re-export trade the system of ocean lines 
focusing in London could not be so complete, the sail- 
ings not so frequent, the ships not so full. The accu- 
mulation of raw material in the markets and warehouses 
attracts the feeder lines which take a part to their for- 
eign destination. The ships which bring the silk, wool, 
linen, etc., from distant ports take coal out and keep up 
the supply at the valuable strategic coaling stations 
which add so much to British naval and mercantile 
prowess. 

But the vast accumulation of raw material from al- 
most every port of the world is also of the greatest 
value to domestic industry. While the foreign manu- 
facturer has to send his representatives to inspect the 
goods in bond or else rely on the judgment of far-away 
foreign agents, the British manufacturer has a most 
wonderful assortment of hides, ores, rubber, etc., at his 
door. He can inspect and select himself. The contact 
with large quantities and innumerable varieties of com- 



88 OCEAN SHIPPING 

modities builds up in London a fund oi expert knowledge 
such as is found in no other single market for an equally- 
large number of commodities. The trade connections 
established through the physical exchange of commodi- 
ties leads to another branch of intermediary trading, a- 
purely brokerage trade, which, while directed from Lx)n- 
don, financed from London and tributary to London, 
never physically touches British soil. On the other 
hand large quantities of goods are shipped or "con- 
signed" to London without definite arrangements as to 
who will purchase them. The far-away producer knows 
that nowhere are there better facilities for handling or 
better chances for selling than in London. This accounts 
for the large consignment market of London. 

Another by-product of this trade is the concentrated 
information of men and commodities which forms the 
basis of the acceptance business. Finally, re-export trade 
is an important adjunct to a successful foreign trade 
policy. Oftentimes the exports of a country do not go 
to the places from which the imports originate. Re- 
exporting, in that case, permits the all-important proper 
balancing of cargo movements. 

Reasons for London's predominance. — But all these 
advantages did not fall into London's lap. To be sure, 
much of the trade is London's legacy, left to her by 
England's century-old liberalism in foreign trade. Prob- 
ably more is London's heritage as capital of the British 
Empire. The following figures show to what extent 
colonial products made up the re-exported articles. Dur- 
ing the four years from 1913 to 1916 Great Britain — and 
London's is the lion share of this merchant trade — bought 
for reselling, in millions : 



ENTREPOT CENTRES AND FREE PORTS 89 

From From 

Colonies other countries Total 

1913 $272.9 $259.2 $532.1 

1914 242.1 221.5 463.6 

1915 275.9 205.2 481.2 

1916 261.3 212.5 473.7 

Then there is England's geographical position, favor- 
able to entrepot trade with northern Europe, practically 
lying at anchor, as it were, at the very gateway to the 
North Sea. 

But much trade flows to London only because of the 
financial control which London bankers and promoters 
have over foreign producing enterprises. In rubber plan- 
tations alone England, that is, chiefly London, has in- 
vested upwards of $350,000,000. This accounts for much 
of the rubber re-export trade of London, to give only 
one example. But apart from these major factors, a 
number of "institutions" of the London market were 
built up in the course of centuries, all of which form an 
essential part of the complex mechanism. These "insti- 
tutions" are the following:* 

"The 'institutions' that make this possible are: first, the sys- 
tem of warehousing, with its certificates or warrants that give 
absolute title to property and are easily negotiable; second, the 
organized facilities in connection with these warehouses and the 
markets by which raw commodities are received and either 
graded as they are, or separated and mixed with others to form 
standard blends readily marketable, this with rigid integrity and ex- 
pertness that the whole world trusts absolutely; third, London's 
speculative community, which has unlimited money and bank- 
ing credit ready to buy at a concession in price almost any 
marketable commodity; fourth, the organized markets or peri- 

1 See The Americas, April, 1916, p. 2. 



90 OCEAN SHIPPING 

odical auctions which speculation and final purchase together 
support; fifth, London's banks, which, relying upon the abso- 
lute surety of the standardization of commodities and upon the 
readiness of the speculative community behind London's markets, 
can without hesitation loan the ready money that the far-away 
shipper is relying upon in conducting his business.'' 

Applying European lessons to this country. — ^The 
opening of the Panama Canal and the shifts of world 
trade caused by the war have given new importance to 
America in this branch of international merchandise ex- 
change; and the strong movement on foot for "greater 
prosperity through foreign trade," naturally directs at- 
tention to Europe's achievements. In applying the les- 
son of London to America one vital difference between 
the two countries has to be borne in mind. England is 
as yet, at least nominally, a free trade country and 
America has a highly protective tariff. That means ease 
of importation and re-exportation for the one country, 
and abundance of red tape and impediments for the 
other. The device by which such protectionist countries 
as are vitally concerned in re-exportation have over- 
come this handicap is generally known as the "free port," 
now more correctly termed "the free zone" in ports, or 
"the foreign trade zone." It is a "free trade island 
within a country that maintains a customs tariff." ^ As 
such it is considered by the customs authorities as for- 
eign territory. To be more explicit, "a free port or free 
zone is a place, limited in extent, that differs from adja- 
cent territory in being exempt from the customs laws as 
affecting goods destined for re-export; it means simply 
that as regards customs duties there is freedom unless 

*E. J. Clapp, The Free Port as an Instrument of World Trade, 
American Problems of Reconstruction, pp.245^. 



' ENTREPOT CENTRES AND FREE PORTS 91 

and until the imported goods enter the domestic 
market." ^ 

History of free ports. — A few words may be said about 
the history of "free zones." The prototype is the free 
port of Hamburg, although such trading centres as 
.Hongkong and Singapore offer similar advantages and 
are older. When Bismarck tried to win the representa- 
tives of the free city of Hamburg over to the Empire, 
serious objections were raised, prompted by the fear that 
the entry into the German customs system would sound 
the death-knell for the wonderful merchant trade of that 
city, so laboriously built up by generation after genera- 
tion. A compromise was reached whereby the "free 
port," an area of sufficient size to offer ample space and 
facilities for re-export trade, was created, while the rest 
of the city entered the customs union. This was in 1882. 
The success of the plan was such that other cities 
adopted the scheme. 

Copenhagen opened a free zone in the early nineties. 
Its business grew so rapidly that continual enlargements 
were necessary. For more recent developments we 
quote :^ 

"Spain, in 1914, authorized a free zone at Cadiz. Barcelona 
secured the same privilege in 1916, Bilbao and Santander in 1918. 
There has been a temporary setback in improving the zones 
under the privilege, owing to the fact that the Spanish govern- 
ment reserved the right to a revocation at any time and did 
not offer the security of a term grant. 

"In the case of Barcelona this condition has now been satis- 
factorily overcome and funds have been appropriated and plans 

' 1 United States Tariff Commission, Information Concerning 
Free Zones in Ports of the United States. 

2 United States Tariff Commission, Information Concerning Free 
Zones in Ports of the United States, 1919, p. 20. 



92 OCEAN SHIPPING 

approved for the early establishment of the free zone in that 
port. The privilege has been granted, though not yet acted 
upon, to Bilbao, Santander, Vigo, and Coruna under similar 
conditions. 

"Sweden, anxious to share in the transit trade of the Baltic, 
opened a free zone at Stockholm on June 1, 1919, and is pre- 
paring to establish free zones at Gothenburg and Malmo. 

"Norway is shown by our consular reports to be interested 
in establishing a free port at Christiania, Bergen, Christiansand 
and Trondhjem. 

"Portugal has authorized ithe privilege by law and the latest in- 
formation was to the effect that establishment was being made 
at. Lisbon." 

Low tariff countries, such as Holland and Belgium, are 
not in such need of exemptions as the others. 

Arguments against free zones. — While there is a strong 
movement on foot in favor of the installation of free zones 
in this country — a National Free Zone Association has 
been formed — and while the United States Tariff Com- 
mission "after an exhaustive study of foreign institutions, 
and careful investigation of American conditions and 
mercantile opinion," has endorsed the enactment of en- 
abling legislation for the establishment and operation of 
free zones, the opposition is no less powerful. The argu- 
ments of the negative, in the main, follow, four lines of 
reasoning : 

(1) The constitutionality of "free zones" has been 
questioned upon the basis of the "preference" and the 
"uniformity" clauses of the Constitution.^ But it is 
argued that a Congress which can make one port a "port 
of entry" and withhold the privilege from others, can 
also pass enabling legislation which permits all ports 

1 Article 1, Section VIII, Qause 1; and Article I, Section IX, 
Clause 6. 



ENTREPOT CENTRES AND FREE PORTS 93 

to install free zones, though not all may take advantage 
of this privilege. 

(2) Free zones are a violation of the protectionist 
principle which is the corner-stone of the fiscal policy of 
this country. Theoretically, it may be argued that to 
make trade in foreign commodities easier, reduces the 
chance of domestic trade. But practical experiences of 
other countries seem to dispute that, even if a slight 
increase in competition along some lines resulted, the 
ensuing advantage would more than counterbalance this 
possible loss. And after all, there are some Democrats 
and more free traders left! 

(3) The geographical position of the principal ports 
of this country is different from that of those ports of 
the wlorld w'hich have become the leading entrepots, 
such as London, Antwerp and Rotterdam at the entrance 
to the North Sea, Hamburg in a strategic position for 
the Baltic trade, Singapore at the gateway to 'the im- 
portant Eastern markets, and Hongkong, an island at 
the miouth of a big river offering a natural gateway inito 
China. In reply to this, one may point to the fact that 
the opening of the Panama Canal means a partial re- 
alignment of the world's trade routes, and that this- coun- 
try will be the main beneficiary of this change. Further- 
more, in view of the increasing importance of the Far- 
Eastern trade and that of the West Coast of South 
America, the position of this country, situated as it were, 
in the strategic center from which it can distribute to 
one continent tlie goods collected from the other, is not 
without its potentialities. 

(4) It is argued that the existing facilities of bonded 
warehouses, 'bonded manufacturing warehouses and 



94 OCEAN SHIPPING 

drawbacks . are sufficient. But the consensus of opinion 
of almost all the interested parties who testified at the 
hearings held by the Tariff Commission in various cities 
of the United States was to the contrary. It was said, 
in the first place, that the present system resulted in the 
useless tying-up of considerable amounts of working 
capital during the period that goods are held in bond. 
While the law allows the refunding of 99 per cent of 
the import duty paid on re-exported goods, the merchant 
cannot use this amount during the time intervening be- 
tween importation and exportation. There are also nu- 
merous other factors to be considered which have to do 
with the practical operations of re-exporting, and which 
arise largely out of the intricacies of the present system. 
So complicated is the procedure in making claims for 
the drawback and in proving the identity of the re-ex- 
ported goods that for this reason alone many producers 
do not find it worth while to apply for drawback at all, 
while large-scale industries find it necessary to go to 
the expense of employing experts permanently to look 
after their drawback interests. It can hardly be said 
under such circumstances that the present system is apt 
to aid in the building up of a large American re-export 
trade in competition with that carried on from Euro- 
pean free port or free trade, or quasi-free trade countries. 
Advantages of free zones. — The superiority of a sys- 
tem of free zones is furthermore emphasized by its posi- 
tive advantages, none of Which can be claimed for the 
present system. Entry and clearance of vessels bringing 
or fetching entrepot trade are simplified by the elimina- 
tion of the endless red tape which is necessitated by the 
enforcement of the customs laws. To be exempt from 



ENTREPOT CENTRES AND FREE PORTS 95 

these would be in itself a strong stimulus to trade. That 
"time is money" has never been so true as to-day in 
view of the present cost figures for ship operation and 
high prices in general. 

Secondly, re-export trade moves both in and out; in 
that way it provides employment to ships in both direc- 
tions. It tends to equalize inbound and outbound traf- 
fic and by doing so remedies one of the most serious 
defects of our present foreign shipping situation, the 
lack of the proper balance of cargo movements to and 
from most parts of the world. With Europe we have 
an export surplus, with South America an import sur- 
plus, etc., — lin each case, a situation which interferes with 
the most economical operation of shipping. In so far 
as free ports or free zones create or encourage re-export- 
ing they contribute to a better equalization of import 
and export cargoes. 

The free zone also offers better facilities for such 
operations as mixing, sorting, cleaning, repacking, etc., 
than does the bonded warehouse, and this again aids 
in building up re-export business. Furthermore, some 
manufacturing processes, such as the making of fer- 
tilizers for export out of raw materials gathered from 
different corners of the globe, would likewise be stimu- 
lated by the establishment of free zones. Finally, the 
re-export trade would be rendered immune from the 
handicaps which arise out of a fluctuating tariff policy. 
Minor advantages are: a reduction in the cost of dray- 
age, opportunity for displays of goods, greater value 
of warehouse receipts, etc. 

Surely, enough has been said in defense, or rather on 
behalf of free zones to prove the advisability of their 



96 OCEAN SHIPPING 

establishment in this country at a time when every en- 
couragement should be given to help establish our newly 
created merchant marine and to assist our export trade, 
the employer of our ships, to safely weather this difficult 
period of readjustment. 

REFERENCES 

Clapp, E. J. The Free Fort as an Instrument of World Trade in 

American Problems of Reconstruction, edited by E. M. Friedman. 

(1918). 

The Port of Hamburg. Chap. III. (1911). 
Mac Elwee, R. S. Forts and Terminal Facilities. Chap. XVII. 

(1918). 
Merchants' Association of New York. Comparative Study of 

Economic, Industrial and Commercial Conditions in the Free 

Ports of Europe and the Port of New York, by P. B. Kennedy. 

(1914). , 
National City Bank of New York. The Coming of the Mechani- 
cally Perfect "Free Port," and other articles in The Americas. 
Ross, P. H. W. The Western Gate, 1911. 

Smith, A. R. Port of New York Annual, Second Edition (1921). 
Smith, J. R. Industrial and Commercial Geography, Part II. Chap. 

XIII. 1913. 
United States. Senate Committee on Commerce. Free Zones in 

Ports. Hearings before Subcommittees on S. 3170, Oct. 1919. 

House Committee on Ways and Means. "Foreign Trade Zones." 

Hearings on H. R. 9778, Oct. 1919. 

Tariff Commission. Information Concerning Free Zones in Ports 

of the United States, (1919). 



CHAPTER VI 

THE WORLD'S LEADING PORTS WITH SPECIAL REFER- 
ENCE TO THE PORT SITUATION IN THE 
UNITED STATES 

Difficulty of comparative statistics. — Comparative port 
statistics is a precarious subject. Together with all in- 
ternational comparative statistics it shares the difficul- 
ties which arise from the lack of a satisfactory common 
denominator. If we make value the basis, comparison 
becomes vague because of exchange fluctuation, and if 
we try to base our comparison on the weight of cargo 
handled we either find no data at all for most countries, 
because of the manifest difficulties of obtaining such 
totals, or else we discover that a ton in our country 
weighs more than a ton in other countries. In the table 
appearing in the Statistical Abstract of the United States, 
giving the vessel itonnage movement in the foreign trade 
of the principal ports of the world, due warning is given. 
We read: "The figures are not comparable." Authori- 
ties state that if the same vessel were measured accord- 
ing to the laws of the various countries the tonnage 
results would vary at least 30 per cent. Moreover, there 
are several kinds of tons to choose from: gross regis- 
tered tons, net registered tons, and dead-weight tons. 
Some countries differentiate tonnage with cargo from 
tonnage in ballast; others do not. Some countries count 
the same ship at each port on the same voyage; others 
do not. We see that the variations are plentiful and 

97 



98 OCEAN SHIPPING 

that all these difficulties are accentuated to-day. The 
war has thrown foreign exchange into a chaotic condi- 
tion; it has dislocated — partly temporarily, partly per- 
manently — the trade of the world, pushing new ports to 
the fore and blotting out others. Large sections of the 
world are in a state of economic upheaval and are for 
the time 'being "hors de concours." While these consid- 
erations detract much from the value of the table on page 
99, nevertheless, it may not be without interest. The 
figures are taken from a table given in the Statistical 
Abstract of the United States, which, in turn, is com- 
piled from the official reports of the respective countries. 
Types of ports. — A glance at these figures will show us 
that ports may be divided into three classes, thus: 

1. Ports with fairly well balanced trade, such as Kobe, 
Singapore, Shanghai and Glasgow. 

2. Ports with excess of imports over exports, such as 
. Liverpool, London and Manchester. 

3. Ports with excess of exports over imports, such as 
New York, Montreal; Philadelphia, New Orleans, 
Buenos Aires and Sydney. 

In the first group we find great entrepots like Ham- 
burg, Antwerp and Singapore. Before the war the "un- 
favorable trade balance" of the ports in the second group 
reflected the position of the various countries as creditor 
nations. During the war the excess of imports con- 
tinued, though for entirely different but well-known rea- 
sons. In the third group we find the New World ports 
with their heavy exports of grain from Montreal and 
Buenos Aires, of cotton from New Orleans, and of manu- 
factured products and all else from New York. 



THE WORLD'S LEADING PORTS 



.^ 



VALUE OF FOREIGN COMMERCE OF PRINCIPAL PORTS 

OF THE WORLD ARRANGED BY COUNTRIES 
(The data are based on the latest official information available in this country) 

VALUE IN MILLIONS OF DOLLARS 



LOCATION 



Calendar 
Year 



Imports 



Exports 



Total 
Commerce 



United States Seaports: 
(customs districts) 

New York. 

New Orleans 

Philadelphia 

Massachusetts 

(Boston and others) 

Washington 

(Seattle and others) 

Galveston 

San Francisco 

Maryland 

(Baltimore and others) 

Virginia 

(Newport News, Norfolk and 
others) 

United Kingdom Ports 

Liverpool 

London 

Manchester 

Glasgow 

Hull 

Bristol 

' Southampton 

Cardiff 

Other Ports 

Montreal (Canada) 

Buenos Aires (Argentina) 

Havana (Cuba) 

Rio de Janeiro (Brazil) 

Santos (Brazil) 

Valparaiso (Chile) 

Yokohama (Japan) 

Kobe (Japan) 

Osaka (Japan) 

Singapore (British Empire) 

Calcutta' (British Empire) 

Bombay' (British Empire) 

Alexandria (British Empire) 

Sydney' (British Empire) 

Melbourne' (British Empire) 

Shanghai (China) 



1919 
1919 
1919 

1919 

1919 
1919 
1919 

1919 



1919 



1918 
1918 
1918 
1918 
1918 
1918 
1918 
1918 



1918 
1918 
1918 
1918 
1918 
1918 
1918 
1918 
1918 
1917 
1918 
1918 
1918 
1918 
1918 
1918 



2,064.7 
177.3 
153.8 

299.4 

195.9 

17.7 

238.0 

38.9 



4.9 



2,357.6 
1,873.5 
380.5 
342.7 
368.4 
224.0 
143.5 
72.5 



186.1 
415.0 
213.3 
119.4 
66,9 
87.7 
25S.3 
390.6 
68.5 
276.3 
188.1 
184.3 
165.8 
135.9 
100.2 
256.4 



1,456.3 
663.1 
519.6 

334.5 

292.3 
467.7 
240.5 

353.7 



175.0 



966 

763 

140 

127 
71 
4 
49.8 
92.4 



397.0 

402.1 

88.6 

65.4 

97.4 

28.8 

406.9 

268.6 

202.1 

264.3 

273.8 

247.0 

201,6 

175.8 

85.9 

240.1 



5,521.0 
740.4 
673.4 

633.9 

488.2 
485.4 
478.6 

392.6 



179.9 



3,323.8 
2,637.2 
621.1 
469.8 
439.9 
228.2 
193.3 
164.8 



583.1 
817.1 
300.8 
184.8 
164.3 
116.5 
665.2 
659. 2 
270.6 
530.6 
461.9 
431.4 
367.4 
311.6 
186.2 
496.5 



' Year ending March 31. 



' Year ending June 30. 



In comparing these figures the rapid decrease in the purchasing power of 
money between 1912 and 1918 should be borne m mmd. 

In this table we miss many well-known names such as Antwerp, Hamburg, 
Marseilles Genoa, and so on. In the case of these ports the latest available 
data are either too old to be of any value for purposes of comparison or 
else they merely reflect the unfortunate results of the war. We therefore 
omit statistics of the trade of the ports of the continent of Europe. According 
to latest reports! Antwerp has become the leading port of Europe and the second 
port of the world. 



100 OCEAN SHIPPING 

A comparison of London and Liverpool. — We see that 
in 1918 New York excelled her nearest rival, Liverpool, 
by almost a billion, and London, by almost a billion and 
a half. For decades London had held first rank until 
about 1910, when New York overtook her. The victory 
of Liverpool over London^ is largely the fruit of war 
conditions. The war concentrated an abnormal mass of 
shipping on the North Atlantic route, and for that traffic 
Liverpool is the natural European terminus. Further- 
more, all ships invading the Thames during Germany's 
submarine campaign were exposed to grave risk of loss, 
not to speak of the military consideration which com- 
pelled shipmasters to follow usual channels marked out 
by the admiralty. Moreover, Liverpool has a more com- 
pactly built port than London, enjoyed unified port con- 
trol more than fifty years before the latter, while the 
Mersey is a wider stream than the Thames. Liverpool's 
trade is more in the nature of through traffic. London 
was the biggest ervtrepot centre of the world, and rela- 
tively speaking, entrepot trade is on the wane. The re- 
turn to normal miay reduce Liverpool's lead, but it is 
doubtful whether Liverpool will have to part with the 
honor of being England's leading port. The following 
figures show the gradual change in the relative position 
of the two. 

VALUE OF TOTAL TRADE (IN MILLIONS OF DOLLARS) 

London Liverpool ' 

1913 $1,997.2 $ 798.3 

1914 1,921.5 1,640.4 

1915 2,409.6 1,906.9 

1916 -. 2,655.0 2,309.5 

5917 2,4532 2,895.2 

1918 2.637.2 3,323.8 

1 See The Americas, July, 1919, p. 29— "A Comparison of London 
and Liverpool." 



THE WORLD'S LEADING PORTS 101 

Weight statistics. — So far all statistics have been given 
in dollar value. That, however, does by no means in- 
dicate the relative importance of different ports to ship- 
ping. The great coal ports, such as Cardifif, Newcastle 
and Las Palmas (Canary Islands) mean much more to 
shipping than the money value of these imports and ex- 
ports would reveal. Thus, to give one example: in one 
y€ar the net registered tonnage entering and clearing at 
Cardifif amounted to twelve million tons as against four- 
teen million at Liverpool; but the value of Liverpool's 
trade was almost twenty times that of Cardiff. Between 
thtse extreme instances, every form of difference may be 
found. Another matter to be considered is the fact that 
different commodities require different types of steamers. 
Thus Liverpool is a great liner port while normally Car- 
diff is the greatest rendezvous for tramps in the world. 

General aspects of the port situation in the United 
States. — We now turn to the port situation in the United 
States. Following the lead of the government statistics 
we may divide seaports into four classes: 

Atlantic Coast Ports. 
Gulf Coast Ports. 
Mexican Border Ports. 
Pacific Ports. 

TJie third group, however, consists only of the relatively 
unimportant port of San Antonio, so that, in the main, we 
deal only with three groups. The table^ on page 102, shows 
the net tonnage of the vessels which entered at and cleared 
fiom these ports: 

1 Statistical Abstract of the United States (fiscal year ending June, 
1919). 



102 



OCEAN SHIPPING 



VESSELS ENTERED AT AND CLEARED FROM SEACOAST 

CUSTOMS DISTRICTS OF THE UNITED STATES 

FROM AND FOR FOREIGN COUNTRIES 

Tonnage, Yeass Ended Dec. 31, 1918 and 1919 

(The "net tons" equals 100 cubic feet of carrying capacity, exclusive of de- 
ductions for space occupied by cabins, machinery, etc.) 



CUSTOMS DISTRICT 



1918 



Entered. 
Net tons. 



Cleared. 
Net tons. 



1919 



Entered. 
Net tons. 



Cleared. 
Net Ions. 



Atlantic Coast: 

Connecticut 

Georgia 

Maine and New Hampshire.. 

Maryland 

Massachusetts 

New York. 

North Carolina 

Philadelphia 

Porto Rico 

Rhode Island 

South Carohna 

Virginia 

Gulf Coast: 

Florida 

Galveston 

Mobile 

New Orleans 

Sabine 

Mexican border: 

San Antonio 

Pacific Coast: 

Alaska 

Hawaii 

Oregon 

San Francisco 

Southern California 

Washington 

Total seaports 

Recapitulation. 

Atlantic Coast 

Gulf Coast 

Mexican border 

Pacific coast 



13,087 
264,949 
640,317 
.682,236 
,366,917 
,381,027 

26,674 
,021,794 
360,108 

86,827 

84,766 
897,760 

,333,707 
965,090 
342,745 
215,036 
,074,189 

90,538 

221,405 
446,474 

22,135 
,063,763 

68,960 
,329,294 



314 

184,829 

676,141 

1,470,793 

1,060,955 

11,057,530 

8,194 

2,043,841 

361,854 

74,906 

27,107 

2,338,229 

1,289,782 
1,010,694 
346,311 
2,921,505 
1,258,648 

89,398 

232,864 
158,341 
99,917 

1,288,727 
181,297 

3,423,541 



6,769 

351,360 

809,154 

1,984,099 

1,771,603 

13,974,752 

33,531 

2,790,532 

430,613 

164,008 

141,016 

1,378,957 

1,547,874 
1,182,919 
494,797 
3,141,405 
1,143,805 

51,235 

175,359 

501,941 

20,734 

1,199,697 
179,388 

2,905,715 



235 

576,052 

959,246 

2,634,923 

1,283,781 

14,427,129 

39,598 

3,315,597 

456,423 

152,518 

126,041 

2,910,796 

1,547,969 
1,420,575 
711,298 
3,469,673 
1,450,045 

52,230 

182,419 
144,175 
137,805 

1,353,087 
284,342 

3,115,486 



30,999,797 



18,826,461 

6,930,767 

90,538 

5,152,031 



31,605,718 



19.304,693 

6,826,940 

89,398 

5,684,687 



36,381,263 



23,836,394 

7,610,800 

51,235 

4,982,834 



40,750,444 



26,881.341 

8,599,560 

52,230 

5,217.313 



' The most important ports of the first group are, for 
the North Atlantic : Portland, Boston, New York, Phila- 
delphia and Baltimore, besides Norfolk and Newport 



THE WORLD'S LEADING PORTS 



103 



News. Of these. New York is in a class by itself. To 
use a phrase of Professor E. J. Clapp : "There are two 
sorts of seaports along the Atlantic Coast, New York 
and all others." ^ The "others" are known as "outports." 
New York's predominance. — The predominance of 
New York is illustrated by the following tabk which 
sihows that through this port has passed, during the last 
fifty years, from one-half to two-thirds of the entire 
foreign trade of the country. Only of late a drop in 
New York's percemtage was caused by increasing trafifi'c 
congestion in its harbor and was, as we shall see, ac- 
centuated by the railway and shipping policy of the 
administration. 



TABLE SHOWING POSITION OF NEW YORK IN THE 
FOREIGN TRADE OF THE UNITED STATES 

Fiscal years ending June 30 (in millions of dollars). 





New York 
(Customs District) 


United States 


New York's per 
cent of whole 




Imports 


Exports 


Imports 


Exports 


Imports 


Exports 


1870 


281 

460 

516 

537 

936 

931 

1,192 

1,338 

1,251 

1,433 

2,905 


196 

393 

349 

519 

652 

1,194 

2,332 

3,053 

2,613 

3,203 

3,384 


436 

668 

789 

850 

1,557 

1,674 

2,198 

2,659 

2,946 

3,096 

5,115 


393 
835 
858 
1,394 
1,745 
2,769 
4,339 
6,290 
5,920 
7,232 
8,198 


64.4 

68.8 

65,4 

63.2 

60.1 

S5.6 

54.2 

50.32 

42.5 

46.0 

56.8 


50.0 


1880 


46.9 


1890 


40.6 


1900..., 


37.2 


1910 


37.3 


1915 


43.1 


1916 


53.8 


1917 


48.53 


1918 


44.1 


1919 


44.3 


1920* 


41.4 







• The World Almanac and Encyclopedia, 1921. 



1 E. J. Oapp, Port of Boston, p. 25. 



104 



OCEAN SHIPPING 



It is interesting to place New York against the back- 
ground of world trade. The Wall Street Journal esti- 
mates that in 1920 one-eleventh of the world's sea-borne 
commerce passed through New York. 

But we have stated that the value of the trade of a 
port does not reveal its relative significance as a ship- 
ping centre and, in fact, a study of the following table 
will show that the percentage of shipping using the 
port never even approximated the larger percentage of 
the value table. 

TONNAGE OF VESSELS IN FOREIGN TRADE ENTERED AT 
LEADING UNITED STATES PORTS (NET TONS) 



YEAH 


New York, 
N.Y. 


Philadelphia, 
Pa. 


Boston, 
Mass. 


New Orleans, 
La. 


Baltimore, 
Md. 


Galveston, 

Tei. 


Entered 


Per 
cent. 


Entered 


Per 
cent. 


Entered 


Per 
cent. 


Entered 


Per 
cent. 


Entered 


Per 

cent. 


Entered 


Per 

cent. 


1830 


305,000 
648,000 
1,145,000 
1,974,000 
3,093,000 
7,611,000 
6,182,000 

7,242,000 

10,517,000 

12,579,000 
13,461,000 
12,913,000 
10,943,000 


27.7 
23.9 
30.5 
39.4 
49.0 
49.9 
46.5 

38.3 

38.8 

35.9 
35.8 
35.1 
35.1 


77,000 

39,000 

132,000 

182,000 

300,000 

1,391,000 

1,094,000 

1,567,000 

2,112,000 

1,939,000 
2,408,000 
2,540,000 
1,966,000 


7.0 
1.7 
3.6 
3.6 
4.8 
9.1 
8.0 

8.3 

7.8 

B.2 
6.4 
6.9 
6.3 


113,000 
291,000 
479,000 
719,000 
794,000 
1,347,000 
1,327,000 

1,816,000 

2,761,000 

2,464,000 
2,461,000 
2,012,000 
1,487,000 


10.3 
12.8 
12.8 
14.3 
12.6 
8.8 
9.8 

9.6 

10.1 

6.1 
6.6 
5.5 
4.7 






61,000 
90,000 
100,000 
186,000 
272,000 
1,503,000 
744,000 

1,115,000 

1,377,000 

2,043,000 
2,528,000 
2,665,000 
1,798,000 


5.5 
3.9 
2.7 
3.7 
4.3 
9.8 
5.5 

5.9 

5.0 

7.3 
6.9 
7.1 
5.0 
















1850 

1860 

1870 

1880 

1881-1890 

(average) 
1891-1900 

(average) 
1901-1910 

(average) 

1915 

1916 

1917 

1918 


350,000 
632,000 
458,000 
761,000 
759,000 

1,224,000 

1,789,000 

3,064,000 
2,804,000 
2,833,000 
3,019,000 


9.3 
12.6 
7.3 
5.0 
5.6 

6.4 

6.6 

8.6 
7.4 
7.7 
9.0 


3,000 
32,000 
32,000 
118,000 
135,000 

475,000 

868,000 

1,562,000 

1,137,000 

1,096,000 

925,000 


0.008 
0.06 
0.05 
0.07 
0.1 

2.5 

3.2 

5,6 

2.'7" 
3.0 



The reason for this is to be found in the fact that New 
York is primarily a liner port and that liners have a 
relatively low net tonnage. The Mauretania, for in- 
stance, has a smaller net tonnage than many a tramp. 
If figures for the volume of trade at the different sea- 
ports were available, New York's share of this country's 



THE WORLD'S LEADING PORTS 105 

total trade would be nearer the tonnage percentage than 
the value percentage. 

History of New York's ascendency. — New York's pre- 
dominance dates back to the opening of the Erie Canal, 
which made that city the gateway for western produce 
destined for Europe, and agricultural products formed 
the bulk of our exports for the better portion of the 
nineteenth century. When the Railway Age came, New 
York's lead was so pronounced that the railroads found 
it wise to adjust themselves to the situation, with 
the result that as it was said of old, "All roads lead to 
Rome," to-day all roads, i.e., all trunk lines, lead to 
New York. New York has three through routes of its 
own to Chicago — the Erie and two New York Central 
lines. In addition. New York has two roads to Buffalo 
— the Delaware, Lackawanna & Western, and the 
Lehigh Valley. ,At Buffalo these two connect with such 
lines as the Grand Trunk, the Wabash, and the Michi- 
gan Central, all leading to the West. Besides these 
roads of its own. New York has direct connections— 
by land or by water — with all railroads that serve its 
competitors in the North Atlantic group. The Baltimore 
& Ohio and the Pennsylvania run into New York, if 
not over tracks at least by carfloat ; the Norfolk & West- 
ern a;id the Chesapeake & Ohio connect with New York 
through the Old Dominion Steamboat Company in which 
they are part owners. 

With this unique position as a railroad centre. New 
York would have still further encroached upon the rights 
of its qutport competitors had not the Interstate Com- 
merce Commission adjusted the rates in such a way as 
to give the southern ports at least a fighting chance. 



106 OCEAN SHIPPING 

The Port differential rate situation. — The early severe 
competition between the North Atlantic ports from 
Baltimore to New York, inclusive, for grain, which for 
decades was by far the most important item in the ex- 
port trade of the country, resulted in a set of "port dif- 
ferentials" on all grain from grain-producing States of 
the Middle West. These port differentials for the export 
of grain form the nucleus of a complicated export and 
import rate structure, which while originally applying 
only to the ports from Boston to Baltimore, inclusive, was 
later extended to include the Canadian ports, Montreal, 
St. John and Halifax, in the north, and the most important 
South Atlantic and Gulf ports to the south. This exten- 
sion or geographical expansion duly considered the 
peculiarities of local traffic conditions which necessitated 
various modifications. The guiding thought was simply 
to create a rate structure which included all the routes 
leading to and from the great middle western grain belt 
and to establish a sound balance of power among the 
rival railroads. A clear grasp of this rate situation is 
indispensable to a clear understanding of the whole 
matter of port competition in the United States. It is 
therefore worthwhile to give a concise account of its 
origin and development.^ 

Two elementary facts must be clearly borne in mind. 
First of all, as late as 1881 the export tonnage of grain 
alone represented as much as 73 per cent, of .the total 
east-bound tonnage carried by the trunk lines to the 
four great Atlantic ports of Boston, New York, Phila- 
delphia and Baltimore. Secondly, that in those days, 

'The historical part of the following discussion of the port dif- 
ferential situation follows in general the outline of Chapters VIII 
and IX of E. J. Qapp's Railway Traffic, 



THE WORLD'S LEADING PORTS 107 

each trunk line had its own ocean terminal; the Balti- 
more & Ohio, Baltimore; the Pennsylvania, Philadel- 
phia; the New York Central and ihe Erie, New York. 
This meant that during the period, 1870-1880, railroad 
competition was identical with port competition. The 
struggle proved so disastrous that an arbitration com- 
mission was appointed to put an end to this cut-throat 
competition. The decision which was reached in 1882 
became the basis of future port competition. Baltimore 
was given the differential of 3 cents under New York and 
Philadelphia of 2 cents, and Boston put on a par with 
New York as to all export trade. On imports, Baltimore 
and Philadelphia were allowed the^ following deductions 
from the New York rate: 



CENTS PER 100 POUNDS 

Class Commodity 

12 3 4 5 6 



Baltimore 8 8 3 3 3 3 3 

Philadelphia 6 6 2 2 2 2 2 



When domestic trade became important these export 
and import rates were applied to east and westbound 
domestic traffic respectively. The justification for these 
differentials is based upon the cost and distance prin- 
ciple. The southern ports are nearer to that part of the 
west which they serve and therefore transportation tends 
to be cheaper. But another factor was possibly even more 
important to that extent. Average ocean rates from 
Philadelphia and Baltimore were found to be higher by 
2 and 3 cents, respectively, than via New York and Bos- 
ton, owing to longer ocean distance and because of poorer 



108 OCEAN SHIPPING 

port conditions in the southern cities. New York also 
offered the advantage of greater frequency of sailings and 
of direct connections with a larger number of markets. 
Therefore, practically no through shipments were booked 
via the southern ports unless the charge for the rail haul 
was so reduced as to neutralize the handicap of the 
higher ocean carriage. 

In the meantime, New Orleans appeared upon the 
scene. In the years from 1882 to 1898 three railroads 
had reached that port and its channel to the sea had 
been considerably deepened. Furthermore, Norfolk and 
Newport News claimed a share of the grain export traf- 
fic and got it on an even basis with Baltimore, i. e., on 
a rate basis below New York. Some American grain 
began to flow via Canadian ports, so railroads serving 
these ports could not remain outside of the rate structure. 

This meant increasing competition for New York, 
which felt unduly handicapped iby this rate structure. 
In 1898, it appealed to the Interstate Commerce Com- 
mission, which, however, let matters remain unchanged. 
But, in the meantime, the ocean rate situation had 
changed. Charter rates had become the same for the 
whole "North Atlantic Range." Only for "berth rates," 
i.e., parcel lots carried by liners, had New York re- 
tained its advantage. On the ground that the grain 
movements were about evenly divided between tramps 
and liners, the railroads voluntarily reduced the differ- 
entials from 3 cents to lyi cents for Baltimore, and from 
2 cents to 1 cent for Philadelphia. It would have been 
impossible to abolish the differentials for cargo lots 
and retain them in full for parcel lots, because, frequently, 
the method of ocean transportation, whether by liner or 



THE WORLD'S LEADING PORTS 109 

by tramp, is not determined until long after the grain has 
reached tide-water. 

The admission of New Orleans and Montreal into the 
rate structure, which we just mentioned, took this form. 
These two ports offered exceedingly low rail rates to 
the interior on all imports, which they needed badly 
to balance their heavy exports of cotton and grain re- 
spectively. Momtreal took a 59-cent import scale, or a 
first-class differential under New York of 16 cents. New 
Orleans accepted the Todd and Knott (1907) arbitration 
which ruled that as to Cincinnati and practically all ter- 
ritory west of and including Louisville, Indianapolis 
and Chicago, the import rate from New Orleans and 
other Gulf ports should be less than the New York rates 
by the following amounts : 

CENTS PER 100 POUNDS 

Class Commodities 

12 7 4 16 



Diflferentials 18 18 12 8 6 6 6 

These diflferentials, up to the war, regulated the import 
traffic via the Gulf. The peculiar feature of the Gulf 
export situation is that export rates are the same to any 
Gulf port, from Galveston to Penascola. 

War-time readjustment of railroad rates. — Theoreti- 
cally much of the rate structure just described is still in 
force to-day. But the war has brought a number of such 
far-reaching changes that to-day theory and practice are 
far apart. In the first place, the railroads being admin- 
istered as a whole by the Government, the national view- 
point somewhat replaced the local interest of the individ- 
ual railroads. This, coupled with the fact that the war 



110 OCEAN SHIPPING 

taxed the railroad facilities to the breaking point, led to an 
endeavor to avoid, as far as possible, unnecessary criss- 
cross movements. The Port Facilities Commission of 
the United States Shipping Board has investigated the 
excess rail transportation of Brazilian coffee imported 
into New Orleans and New York, by tracing the re- 
spective imports of the two cities to their final destina- 
tion and calculating the unnecessary haul in each case. 
The result of this investigation is given in the chart on 
page 111. 

Two additional factors complicated the situation. 
There was, in the first place, the wonderful growth of 
American tonnage which put into the hands of the Gov- 
ernment the opportunity to develop new trade routes 
wherever facilities seemed lacking or trade expansion 
called for new ones. In an indirect way the establish- 
ment of new trade routes was aided by the second factor, 
the congestion of the North Atlantic ports. New York 
in particular. The Shipping Board and the Railroad 
Administration worked hand in hand, the former allo- 
cating ships as they were turned out by the Emergency 
Fleet Corporation, to ports and trade routes, the Rail- 
road Administration revising rates to direct the trade 
into the new channels. 

The work of the latter in this respect is summed up 
as follows in the Annual Report of the Director General 
of the Railroads. (Division of Traffic, 1919, p. 5.) 

"The restoration of more nearly normal commercial conditions, 
the larger number of American ships available for foreign trade, 
and the continued congestion at many ports soon demonstrated the 
necessity of equalizing the rate bases to and from certain! terri- 
tories and ports so as to distribute the movement of the traffic for 



THE WORLD'S LEADING PORTS 



111 



'51 I 






i:?^;BuS^F&^«'-=i 



r *i»aro*r»i*tMnio«>oov^*Hw«^»^v*wn^ 



I.II,..IP 


s 
1 






: :;-™.!-S 


1 




|i 






:'ii 




112 OCEAN SHIPPING 

the advantage of all interests. Among the changes or revisions made 
are: 

"The revision of both import and export rates via Pacific Coast 
ports more nearly to equalize the shipping routes via the Atlantic 
and Gulf ports. 

"The publication of revised export rates from points in central 
territory to the South Atlantic and Gulf Ports better to distribute ■ 
export traffic. 

"The revision of rules covering port and handling charges on 
the Pacific coast under which steamship lines assume liability for 
demurrage charges resulting from their failure to take the goods 
when delivered in time for scheduled saiHngs." 

The revision of low export rates to the Gulf ports' 
is the most important item. It has stirred up a great 
deal of commotion, the Eastern trunk lines violently 
protesting and the business interests of the Midwest, 
Gulf and South Atlantic territory applauding with equal 
vigor. The situation was further aggravated by several 
horizontal rate increases. During the war, the United 
States administration authorized a blanket rate increase 
of 25 per cent., and later on the Transportation Act of 
1920 accorded the railroads a further increase of 33 1/3 
per cent, for inter-territorial, and 40 per cent, for intra- 
territorial traffic. The increases threw the old differential 
rate system completely out of gear, emphasizing and 
widening the effects of previous changes. Horizontal rate 
increases are unscientific, as they do not affect low rates 
and high rates alike. A 40 per cent, increase on a SO-cent 
rate adds only 20 cents, but on $1 rate it adds 40 cents, 
and in business, absolute amounts and not percentual 
relations count. As it is, the rate increases mean an addi- 
tional stimulus to divert traffic from the trunk lines to the 
railroads serving Gulf and South Atlantic ports. It is 



THE WORLD'S LEADING PORTS 113 

Stated by reliable authorities that as the rates stand now, 
practically no all-rail grain shipments from the middle 
western territory could go to North Atlantic ports, and 
the only export grain that would reach New York would 
be that moving by the Great Lakes and the New York 
Barge Canal. No wonder that we find the trunk lines 
preparing for a battle royal, by which they hope to bring 
about a revision of the present rate situation. 

The Shipping Board did their share to accelerate the 
readjustment. Admiral Benson, Chairman of the Board, 
is strongly in favor of a policy of directing exports 
through the ports which are nearest to the production 
centres of the articles concerned, and of attracting im- 
ports to the ports closest to the teritory in which the 
imported commodities are to be consumed. He an- 
nounced his desire "to break up the monopoly hereto- 
fore held by New York" by allocating tonnage to trade 
routes leading to and from other ports of the country. 
The Evening Post^ (New York) commented upon this 
plan as follows : 

"From the economic standpoint it is perfectly clear that it would 
be easier on the railroads of the country to have their traffic spread 
out along the Atlantic Coast; equally clear is it that there would 
be a very substantial saving in time and expense and that it would 
increase the capacity of the country as a whole for export trade if 
certain ports of the country could specialize in their equipment, 
their railroad connections, etc., on coal and other bulk commodities, 
other ports on general merchandise freight, and so on through the 
list. Beyond any question of a doubt such organization of the 
railroads and of the ports of the United States for foreign trade 
would benefit the whole country in general and each individual port 
in particular, but it would require years, if not generations, to 

1 July 24, 1920. 



114 OCEAN SHIPPING 

thoroughly accomplish such reorganization and development with- 
out, in the meantime doing serious injury to current business. Cer- 
tainly it would not be accomplished by mere formation of a few 
regulations by the Shipping Board diverting ships from points where 
they are needed and can be profitably operated to points where 
they are not needed and would incur only expense to their owners 
or operators. As long as New York is the financial and insurance 
center of the country in foreign as well as domestic commerce 
and as long as its other facilities maintain their present ratio in 
relation to similar facilities in other American ports it will continue 
by force of circumstances to hold its present supremacy (whether or 
not that supremacy is a monopoly does not affect the matter) in 
the export and import trade of the United States." 

The present rate situation as it affects port competition 
is the result of measures dictated under the pressure of 
war emergencies. Its retention is unjustified in these times 
of peace. The present rates, therefore, should be looked 
upon as transitory and the near future will disclose what 
permanent readjustment will be made. 

REFERENCES 
Bankers' Trust Company of New York. Americans Merchant 

Marine. Chap. XX. (1920). 
Clapp, E. J. The Port of Hamburg. (1911). 

The Port of Boston; a Survey of North Atlantic Ports. (1916). 

Railway Traffic. Chap. VIII. (1917). 

Report on Charleston, S. C.(1921). 
Daish, J. B. The Atlantic Port Differentials. (1918). 
Dominions' Royal Commission. Final Report. (London, 1918). 
KiRKALDY, A. W. British supping. Book IV. (1914). 
Mac Elwee, R. S. Ports and Terminal Facilities. Chaps. II. and IV. 

(1919). 
Rush, T. E. The Port of New York. (1920). 
Smith, A. R. Port of New York Annual, Second Edition (1921). 
Smith, J. R, Industrial and Commercial Geography. Part II. Chap. 

VI. (1913). 
United States. Department of Commerce. Statistical Abstract. 

(Annual). 



PART III 
THE OCEAN CARRIER 



115 



CHAPTER VII 
SIZE, SPEED, AND EFFIQENCY 

Rapid growth in size of vessel during the nineteenth 
century. — There are few works of man which illustrate 
the advance of civilization and the victory over the forces 
of nature more strikingly than ships : "They are grander 
things than all the art of towns ; their tests are tempests and 
the sea that drowns. . . . They mark our passage as 
a race of men."^ 

The ship of to-day is sixty times bigger and many times 
faster and better than its prototype of George Washing- 
ton's time. On the even basis of ton for ton, the shipping 
of the present is five or six times more efficient than that 
of the early days of this nation. This is largely the result 
of the substitution of coal and oil for sails as motive 
power, and of iron and siteel for wood as material of con- 
struction. When we compare the leviathans of to-day, 
with their gross register tonnage of 50,000 tons and 
more with the 400-ton ships which were the pride of 
Salem a century ago, we must indeed marvel ait the prog- 
ress of m^ankind upon the sea. 

Economic justification of large size. — The enlargement 
of ships was rendered profitable by the vast increase in 
the volume of trade during the last century, which wit- 
nessed the transition from intermittent luxury trade to 
continuous world-wide exchange of bulky necessities. 
This growth was stimulated by the keen competition 
existing among rival steamship lines, which only in re- 

ijohn Masefield. 

117 



118 OCEAN SHtPPtNQ 

cent years came to satisfactory agreements with one 
another, and was made possible by the development in 
the art of shipbuilding particularly in regard to the 
marine engine. 

The explanation for this continuous growth in the size 
of ships is to be found in the fact that increase in size 
is the most valuable resource of the naval architect, as it 
is directly conducive to the attainment of his great aims : 
safety, comfort, speed and economy. 

Advantages accruing from large size. — Increase in size 
gives comfort in the form of more deck space, greater 
height above water and less disturbances due to wave 
motion. It assures greater speed because the greater 
the length of a vessel in proportion to her total weight 
the smaller becomes the power required to propel a given 
displacement at a given speed. Finally, under normal 
conditions, a ship's earning capacities, depending on 
space and displacement, are increased at a greater ratio 
than the cost factors, hence the economy of larger ves- 
sels. This is true both in the case of increased length 
and of increased draft. We quote the following con- 
crete example illustrative of this principle. The case 
chosen is that of a cargo vessel having a speed of l3 
knots at sea on a 2000 mile voyage. 

"On a length of 400 feet we can construct a vessel weighing 
3,700 tons which would carry 4,000 tons of cargo and consume 
SOO tons of coal. Each 100 tons of cargo, therefore, involves 
92J^ tons of constructive material and 12j^ tons oif coal per 
voyage. A vessel SOO feet in length would weigh 6,750 tons, 
would carry 8,700 tons of cargo and consume 700 tons of coal. 
Each 100 tons of cargo in this case requires only 77]^ tons of 
vessel and 8 tons of fuel." i 

1 See Alexander Gracie, Twenty Years Progress in Marine Con- 
struction, p. 687 (Smithsonian Institution Report). 



SIZE, SPEED AND EFFICIENCY 119 

That refers to the length. The importance of increase 
in draft is illustrated in the following statement : 

"The conclusion that unrestricted draft is necessary for 
economic transport can be arrived at from first principles. A 
vesseil constructed of a depth sufficient to go to say 40 feet 
draught does not cost so very much more than a vessel of a 
depth constructed to go to 29 feet draft, whereas the increase 
in weight of cargo is the difference between the extreme draft 
of the vessel and the draft the vessel must have in order to 
float her hull, and machinery, and coal, and stores. 

"Supposing two ships are constructed, 'the one of 29 feet 
draft and the other of 40, and in each case the draft necessary 
to float hull, machinery, etc., before paying cargo can be put 
in, is 23 feet. In the one case there is only 6 feet of draft 
available for paying cargo whereas in the other case there is . 
17 feet. The weight of hull for the restricted draft vessel in- 
creases much more rapidly than the displacement. The beam 
cannot be increased in the same ratio as the length, or the sta- 
bility conditions will be interfered with. Before a great l&ngth 
is reached the dead-weight that can be carried no longer in- 
creases as the length of vessel increases, but begins to de- 
crease. Farther, the excessive proportion of breadth to draft 
in the large vessel of restricted draft is bad from the point of 
view of resistance and therefore the running costs, which depend 
on the power of the machinery, are considerably increased. 

"Following out this principle. Sir John Biles supplied vari- 
ous practical and very striking illustrations. He found that if 
draft were unrestricted the cosit of trans'port steadily decreased 
with increase of length; thus a vessel 700 feet long, with pro- 
portionate draft, could transport goods on a 3,000-mile voyage 
at a speed of 14 knots, 13 per cent cheaper than a smaller 
vessel of 490 feet in length, while further increase in speed in 
the larger vessel would be less costly. He also found that 
increases in length is uneconomical unless accompanied by 
adequate draft; thus, with draft restricted to 23 feet 3 inches, 
the cost of transport per ton for a voyage of 3,000 miles by a 
vessel 700 feet in length would be SO per cent greater than if 
the same vessel had its full proportionate draft; in fact, in- 



120 OCEAN SHIPPING 

crease of length without proportionaite increase of draft not 
only does not diminish the cost of transport, but actually in- 
creases it." 1 

Large vessels few, but conspicuous. — Because one 
hears so much of the few very large ships, such as the 
Leviathan, Aquitania, Olympic, etc., it is easy to gain a 
wrong impression of the average size of modern ocean- 
going vessels. It can not be emphasized too much that 
the bulk of the world's ocean-going tonnage consists of 
relatively small vessels. Lloyd's Register for 1919-1920 
gives the total gross tonnage of steam and motor vessels 
of the world as 47,897,407, and the number as 24,386; 
this gives an average size for steam and motor vessels 
(of 100 tons and more) of slightly less than 2,000 tons. 
If we include sailing ships in our calculations, the aver- 
age is reduced to less than 1,700 tons. 

A more complete picture is gained frorri the following 
table, taken from the same source : 

NUMBER OF STEAMERS OWNED BY PRINCIPAL MARI- 
TIME COUNTRIES, ACCORDING TO CERTAIN 
DIVISIONS OF GROSS TONNAGE 



Tonnage 




Number 


Tonnage 


Number 


100 & under 200 


4,648 


5,000 & 


under 


6,000 


1,213 


200 " 


500 


5,269 


6,000 " 


tt 


8,000 


1,174 


500 " 


1,000 


2,604 


8,000 " 


(1 


10,000 


289 


1,000 " 


1,500 


1,877 


10,000 " 


n 


15,000 


185 


1,500 " 


2,000 


1,374 


15,000 " 


(1 


20,000 


31 


2,000 " 


• 3,000 


2,671 


20,000 " 


« 


25,000 


13 


3,000 " 


• 4,000 


1,675 


25,000 and above 


9 


4,000 " 


5,000 


1,354 











In studying this table it must be borne in mind that 
the present day tonnage is largely a heritage dating back 

^ Th? Americas^ February, 1918, pp. 3, 4, 



SIZE, SPEED AND EFFICIENCY 



121 



many years. A better idea of the development of ship 
size is gained from figures which register annual con- 
struction. 

For this purpose we reproduce a table compiled by the 
United States Shipping Board (Port and Harbor Facili- 
ties Commission), which shows the number of Steam and 
sailing vessels, by classes of tonnage (500 tons gross and 
over) built during each quinquennial period, from 1879 
to 1919, also indicating, in per cent, the relative impor- 
tance of each group. 



CROSS MSaSE 




«««-»«» 1 






— ib5I; 




^=m 


i«sn 


1 — woil 


im—l 


1TO9 1913 1 




9aAT 


rarent 




Peicrac 


Kidbtr 


Fnent 


llmtor 


Peretut 


»»«■ 


fnnat 


Knlnr 








y«wl« 


tawBt 

fnr.1 


i.to6 m .^r 


























12 








.' 




























































































































































i 












» 




20 


. 
































































































































.s 


36 














't 














































































3,000 to 3,vn 
















U.0 


*11 


17.0 


«ai 


u.« 


sat 








































3U^ 


IIS 










U.0 


no 


U.l 


ni 


l».l 


nt 


11,S 


tat 




4U 


U.S 


































ffioa u !,»» 






























































U 








MO.0 






n^ 
^-«» 




-*- 


100.0 




100.0 






-* 

^j^ 









To supplement these figures the following data per- 
taining Jio earlier periods might be of interest for the 
sake of comparison : 

1769: 389 vessels of an aggregate tonnage of 20-000 

were built giving an average of less than 52 tons. 
1800: A 300-ton vessel was considered very large. 
1825: 400 tons represented the maximum of vessels 

in the East Indian trade. 
1840: Double decked ships of 1,000 tons sailed in the 

North Atlantic trade. 
1850-1860: Many 1,500-ton ships were afloat; the 

largest vessel measured approximately 2,500 tons. 



122 OCEAN SHIPPING 

Large vessels represent highest achievement. — Al- 
though all the ships of more than 15,000 tons built during 
the twenty years from 1899 to 1918 (before that time no 
such sizes were reached) number only fifty-six, and al- 
though their production during none of the quinquennial 
periods given reached 1 per cent of the total ship produc- 
tion in number, they represent the highest achievements 
in naval architecture, combining in themselves all- the 
advances made in that art and industry, and embodying so 
much national pride in their creation that no book on 
world shipping can be complete without devoting some 
space to their history and construction. 

The following is a list of six steamers, each of which 
held the world's record for size during the quinquentxial 
period during which it was built. 



Name of Period when 
Vessel Constructed 

Camipaaia 1889-93 

Cymric 1894-98 

Cedric 1899-03 

Mauretania . . 1904-08 

Imiperator 1909-13 

Bismarck 1914-18 



In thirty years the gross tonnage grew more than 
fourfold. It should be noticed that all of these ships — 
with the exception of the last named, which though 
launched just before the war is still awaiting its com- 
pletion, ply on the North Atlantic route, where alone 
such large ships are warranted by the trafific require- 
ments. 









Deep 


osis Ton- 






Load 


nage 


Length 


Width 


Draft 




feet 


feet 


feet 


12,884 


601.0 


65.2 


29.0 


13,370 


585.5 


64.3 


31.0 


21,040 


680.9 


75.3 


36.9 


32,508 


790.0 


88.0 


38. 


51,969 


882.9 


98.3 


37.0 


56,000 


912.0 


100. 


41.3 



SIZE, SPEED AND EFFICIENCY 123 

Limitations upon further growth of steamers. — There 
has been much discussion of the wisdom of going to such 
extremes in building large ships. Some people view the 
matter purely in the light of international rivalry or 
vainglorious efforts on the part of shipowners to get 
the advertisement which goes with the title to the larg- 
est ship afloat. There are no ships of excessive size 
being, planned at present, if we discount the rumor of 
1,000 ft. steamers to be built in this country to wrest 
the blue ribbon of the ocean from the Mauretania simul- 
taneously depriving the Leviathan of the glory of being 
the biggest ship afloat. We are passing through an era 
of retrenchment and moderation. The White Star Line 
has abandoned the plan of building the Homeric of 38,000 
tons gross and has substituted a 16,000-ton boat to be 
known as the Doric. The motto of the Cunard Line 
also is "smaller and safer." 

The question of the sizie of ships cannot 'be properly 
viewed from the shipbuilder's viewpoint alone. In the 
first place, the matter of insurance becomes increasingly 
difficult as the size of the ship grows. Secondly, the 
economies which may be achieved in the operation of a 
vessel by a relative reduction of the "tare," i. e., the 
weight of the carrier compared to the weight of the 
cargo carried, may result in other expenditures which 
should be deducted from the purely shipping economies, 
to measure their real worth. 

Large vessels necessitate big terminal outlay. — These 
expenditures comprise, chiefly, the money spent for 
harbor improvements, deepening of channels, dredging, 
pier-extension, etc. Some harbors are formed by nature 
so that they can welcome the deep-draft vessels with- 



124 OCEAN SHIPPING 

out great outlay; but more ports, if they wish to keep 
in the race for international trade, must provide artificial 
facilities. Improvements are often progressively costly; 
the work of dredging and keeping clear each extra foot 
of depth of the channel becomes increasingly expensive. 
Somebody has to foot the bill; whether the expense is 
shown directly in the form of harbor dues imposed on 
entering ships or whether it is absorbed by inclusion 
into the general tax accounts of a country, is of no im- 
portance. In the end the trade of the country pays. 

Large size handicaps vessel operation. — Another fac- 
tor has to be considered: the bigger the ship the fewer 
the ports open to it, in spite of all dredging and other 
improvements. That means increased specialization and 
reduced flexibility for the ship and frequently necessi- 
tates heavy transshipments of cargo from the few fa- 
vored ports to the large number of smaller ones. That 
also involves expense and a loss of time. 

Therefore, to sum up, we may quote A. J. Sargent:^ 
"The tendency towards great size, the narrow ship- 
builder's point of view, without reference to other ele- 
ments in the cost of transport, may, like the increase 
in speed, result in a higher total delivery-cost for the 
goods. Speed has its advantages. Which must be paid 
for, but even these advantages can be bought at too 
high a rate. Apart from possibilities of economical 
working, size is of no great advantage, except perhaps 
for advertisement or national boasting; it is a luxury, 
and the next generation is not likdy to have too .much 
capital to spare for the provision of luxuries such as 
steamers of forty-foot draught and upwards. Not many 

* See Seaways of the Empire, pp. 42, 43, 



I 
SIZE. SPEED AND EFFICIENCY 125 

port authorities are likely to be in a position to endorse 
the statement of the engineer of one of the great ports 
of the Southern Hemisphere : 'We intend to be an up- 
to-date port, whether it pays or not 1' " 

Increase in speed costly. — Hand in hand with the in- 
crease in size there went an increase in speed, though 
this was less phenomenal. The two factors are subject 
to opposite laws ; size is governed by the law of in- 
creasing return, in the sense that, other things being 
equal, each unit added contributes to the earning capac- 
ity more than it does to the initial cost. Increase in 
speed, on the other hand, is bought at an increasing 
cost per unit. Thus a given steamer, 680 feet in .length, 
crossing the Atlantic at a speed of 16 knots an hour, 
would consume 2,000 tons of coal during the voyage and 
carry 12,000 tons of cargo. To raise the speed to 22 
knots would involve a threefold sacrifice. First, the 
coal consumption would rise to 3,500 -tons, the cargo 
carried would be reduced to one-fourth, or 3,000 tons, 
and the initial cost would be raised by 25 per cent.^ 

A comparison of the Imperator with the Bismjarck 
will show a similar result. The former ship was built 
for comfort, therefore the ocean speed was limited to 
22yi knots, which is obtained by turbines of 62,000'horse 
power. The Bismarck, which is less than 10 per cent 
larger, to gain a speed increase over the Imperator of 
but 3 knots an hour, was planned with a machinery to 
develop 90,000 horse power, or almost 50 per cent more 
than the smaller steamer. The high cost of speed is 
furthermore illustrated by the subsidies granted by many 
governments for the carriage of mails at a stipulated 

1 Alexander Gracie, op. cit., p. 690. 



126 OCEAN SHIPPING 

speed. Speed is a vital factor for passenger vessels. It 
is perhaps the strongest drawing card a passenger liner 
possesses and if luxury and size are added, the fast boat 
when run in the right service, is sure of full bookings, 
a large number of travellers gladly paying the extra 
fare charged. The history of passenger business on the 
Atlantic is like a long row of speed contests, one com- 
pany vying with the other, one country competing 
against the other for the much coveted blue ribbon of 
the Atlantic. 

The race for "the Blue Ribbon of the Ocean."— The 
race started far back in 1838, when the Sirius and the 
Great Western crossed the Atlantic in seventeen and 
fifteen days respectively, the former leaving Liverpool, 
while the other started from Bristol. Then followed the 
famous race between the Collins liners and the Cunard 
flyers. The latter had been in undisputed control of the 
speed record, but lost it to their American rival in 1850. 
Four years later the British line came to the fore again. 
For the next forty years the speed record was held by 
various British lines until, in 1897, Germany won the 
honor, which she held for ten years. 

Some interesting details are given in the table shown on 
page 127. 

Increasing efficiency of fuel. — The cost of speed is best 
illustrated by the fact that the Great Western consumed 
28 tons of coal a day as against the 1,000 of the Maure- 
tania. But considering the enormous size of the latter, 
this increase is not so great as one might expect. Re- 
markable improvements in the construction of the hull 
and the marine engines have increased the efficiency of 



SIZE, SPEED AND EFFICIENCY 



127 



TABLE SHOWING THE EVOLUTION OF THE ATLANTIC 

LINER 1 



NAME 



Gross 
Tonnage 



Length 
(feet) 



I. Horse 
Power 



Speed 

Knots 

(per 

hour) 



Fuel 
Con- 
sump- 
tion 
Tons 
(per 
Day) 



Fropulsias 



Engine 



Ma- 
terial 



Date 



Royal William., 

Sinus 

Great Western. , 

Britannia 

Great Britain. . . 

America 

Baltic 

Asia 

Persia 

Great Eastern. . 

Java 



' OceaniC; 

Britannic 

City of Berlin. 



Umbria 

City of Paris. 



Teutonic 

Campania 

Kaiser Wilhelmll. 



Celtic 

Mauretania. . 



Olympic.. . 

Aquitania. . 

Imperator. . 
Leviathan.. 
Bismarck.. 



700 
1,340 
1,156 
3,270 
1,825 
3,000 
2,226 
3,300 
18,9U 

2,697 
2,950 
3,808 
5,004 
5,490 
7,391 
8,127 
10,669 

9,984 
12,500 
19,361 

20,904 
31,938 

46,000 

47,000 

52,000 
54,282 
56,000 



176 

208 

236 

207 

302>i 

251 

282 

266 

376 



337 

358 

420 

455 

488>i 

515 

500 

527K 

565?i 

600 

678 

6805i 
762 

901 
911 
912 



180 

320 

440 

740 

1,000 

1,400 

800 

2,400 

3,600 

6,600 

2,650 
3,100 
3,000 
5,500 
4,799 
9,900 
14,500 
18,000 

16,000 
26,000 
45,000 



70,000 
50,000 
60,000 
61,000 

90,666 



7,S 




9 


28 


8.5 






35-'5b 


10.25 


60 


12.5 




13.8 


ISO 


13.5 


280 


14 




14.4 


90 


14.75 




16 


7,5 


16 


120 


16.7 


200 


19.5 




10 


328 


21 





22 
23.5' 



22 



485 
700 



1,160 
1,150 
1,200 



Paddle. 



Screw 
Paddle, 



Screw and 
Paddle. . 

Screw 



Twin 
Screws. 



Quadruple 
Screws 

Triple 
Screws 

Quadruple 
Screws . . 



Steam. 



Compound 



Triple 
Expansion 



Quadruple 
Expansion 

Turbines. 



Wood. 



Iron. . 
Wood. 



Iron. 



Steel. 



1833 
1838 
1838 
1840 
1843 
1848 
1850 
1850 
1855 
1858 

1865 
1867 
1871 
1874 
1875 
1881 
1884 
1888 

1888 
1893 
1901 

1901 
1907 

1910 

1914 

1913 
1911 



each ton of coal burned. The same amount of coal 
propels to-day approximately eight times as much dis- 
placement tonnage as was the case seventy years ago. 
Sir James McKechnie, at a recent launching, remarked 
that while in 1875 seventeen pounds of coal were con- 
sumed in conveying 100 tons of cargo one mile on ocean 

1 Adapted from Kirkaldy, British Shipping (Appendix). 



128 OCEAN SHIPPING 

voyages, to-day four pounds accomplish the same result.* 
The speedy liner foregoes much or all of the direct 
monetary advantages gained by this improvement, but 
not so the tramp, the purely cargo carrying vessel. The 
speed of the average tramp has remained practically 
constant, at 11 knots, for twenty or thirty years. But if 
we compare two typical tramp vessels built twenty years 
apart we note that the tramp owner reaped the benefit 
of the improvements in greater earnings: 

Deadweight Indicated Coal Con- Knots 

Year Ton Horse-'power sumed Daily perhr. 

189S 6,400 1,400 24 tons 11 

1915 9,600 2,300 32 " 11 

Fifty per cent more deadweight is carried and 64 per 
cent more power developed, but only 33 per cent has 
been added to the coal account. 

Steamship efficiency. — Size and speed are vital factors 
of vessel efficiency but other elements contribute to the 
result. The transition from wood to iron and later to 
steel is of vital importance. Every improvement in the 
quality of material, every advance in the better distribu- 
tion of those materials is a step forward toward greater 
efficiency. The introduction of iron about the year 1820, 
and of steel about 1870, were milestones of progress in the 
history of steam navigation. An interesting estimate of 
the increasing carrying capacity was made by Sir Norman 
Hill, Secretary of the Liverpool Steamship Owners' Asso- 
ciation, in a valuable report published in 1909. He as- 
sumes that : 

1 Nautical Gazette, April 24, 1920, p. 637, 



SIZE, SPEED AND EFFICIENCY 129 

"A steam vessel (iron' or steel) 

built prior to 1888 carries 2 times its net tonnage. 

A steam vesseil (steel) built be- 
tween 1888 and 1898 carries 2% (times its net tonnage. 

A steam vessel (steel) built be- 
tween 1898 and 1906 carries.. . .2^ times its net tonnage. 

A steam vessel (steel) built be- 
tween 1906 and 1908 carries. .. .2.7 its net tonnage. 

To the increased speed and greater carrying capacity 
per unit of cubical contents must be added the effect of 
improvements in loading and unloading. Rapid loading 
and discharge of cargo are of vital importance to all ves- 
sels; to the expensive liner because of the amount of 
interest and depreciation charged against it every hour of 
the day, to the cheaper tramp because of the relatively 
larger amount of cargo carried. Cargo can be handled the 
more rapidly the less it has to be moved horizontally 
along the holds and between the decks before coming 
under the hatchways. The tendency, therefore, is towards 
increased hatches, so much so that some of the modern 
tramps have almost continuous hatches, in breadth nearly 
equal to half the vessel's beam. Hold pillars, which inter- 
fered with rapid cargo handling, have almost disappeared. 
Also the winches have been greatly improved so as to 
assure greater dispatch. 

Port delays neutralize gains in efficiency. — But all the 
benefits to be derived from these improvements in ship 
construction, — better marine engines, novel loading and 
unloading devices, — may be annulled by neutralizing 
forces. To Sir Frederick Lewis, Chairman of Furness, 
Withy & Co., is attributed the interesting statement 
that despite the increase in the registered tonnage during 



130 OCEAN SHIPPING 

the five years from 1914 to 1919 by 6 per cent, the cargo 
moving capacity of the world's merchant marine had 
been reduced by one-third. The explanation given for 
this anomalous situation is that strikes, inadequate port 
facilities and shortened virorking hours of longshoremen 
have so crippled the efficiency of the world's nierchant 
marine that the time of the ships at sea has fallen from 
75 per cent before the war to 48 per cent in 1919. This 
means that on the average, more than half of the world's 
tonnage is held in port, moored to piers, waiting to be 
loaded or to discharge cargo more often than actually 
loading or unloading. The captain of one of the largest 
ships under the American flag was reported as saying 
that the discharging and loading of his cargo took about 
as many days as hours in pre-war times. The American 
International Corporation kept a log of the performances 
of the first 2>7 ships delivered to the Shipping Board and 
allocated by that Board to various steamship companies : 

"A faithful record showed that on eighty voyages to one 
hundred different ports the thirty-seven vessels steamed 427,814 
miles, carrying 600,000 tons of cargo. Althougih the ships are 
equipped with the most improved machinery for expediting loading 
and unloading, the log details that the fleet was at sea only 48 per 
cent of the time. Only five of the ships were detained for any con- 
siderable period of time for repairs. The log of the ships for 
August and September cites some of the delays with which shipping 
is having to contend. It follows: 

Seven ships at Liverpool unable to move on account of strikes 
and congestion. Held for period of days — 40, 43, 45, 19, 19, 
55, and 22. 

Three ships in Havre, 25, 30, and 27 days — strike. 

One ship in! London 29 days — congestion. 

One ship in Cardiff, 28 days — coal strike. 



SIZE, SPEED AND EFFICIENCY 131 

One ship in New York, 22 days — strike. 

Two ships in Marseilles 29 and 27 days — congestion."^ 

The Port Facilities Commission of the United States 
Shipping Board in a very valuable report on "Econo- 
mies effected by the more rapid turn-around of vessels in 
United States Ports" (prepared by X. W. Cleworth) 
arrives at the following interesting conclusions. The 
figures refer to an average size, steel, coal-burning vessel 
of 6,450 deadweight tons, which handles both cargo and 
passengers. The average daily expense in port is calcu- 
lated at almost $4,000, so that a reduction of the stay 
in port from 15 to 5 days means a saving of $40,000, 
or more than 5 per cent of the capitalization of the ves- 
sel, which is put at less than $800,000. 

The following table gives the additional steaming 
radius gained by shorter turn-around. 



Days in Port 


Additional Steaming Distance 


14 


264 


13 


528 


12 


792 


n 


1.0S6 


la 


1.320 


9 


1,584 


S 


1,848 


7 


. 2,172 


6 


2,376 



The question of the commercial efficiency of a cargo 
carrier thus practically resolves itself into a ratio of the 
time spent at sea, when the vessel is performing useful 
work and earning money, to the time spent in port when 
loading or discharging, or idly waiting for its turn. 

1 See Annalist, Nov. 3, 1919, p. 349. 



132 OCEAN SHIPPING 

* ^ 

REFERENCES 

Abbot, W. J. American Merchant Ships and Sailors. (1902). 

Annin, R.. E. Ocean Shipping; Elements of Practical Steamship 
Operation. Chaps. VIII.-X. (1920.) 

Bank of the Manhattan Company. Ships and Shipping of Old 
New York. (1915). 

Dominions' Royal Commission. Final Report. (London, 1918). 

Gracie, Alexander. . Twenty Years Progress in Marine Construction. 
From the Smithsonian Report for 1913, pages 687-707. (1914.) 

Hough, B. O. Ocean Traffic and Trade. Chap. II. (1915.) 

Johnson and Huebner. Principles of Ocean Transportation. Chaps. 
I.-IV. (1919.) 

KiRKALDY, A. W. British Shipping. Book I. (1914.) 

Marvin, W. L. The American Merchant Marine. Its History and 
Romance from 1620-1902. (1902.) 

National Foreign Trade Council. Ocean Shipping. (19170 

Riegel, R. Merchant Vessels (1921). 

Smith, J. R. The Ocean Carrier. (1908.) 

State Street Trust Company, Boston. Old Shipping Days in 
Boston. (1918.) 

Talbot, F. A. Steamship Conquest of the Sea. Chap; I. (1912). 

United States. Commissioner of Corporations. Transportation by 
Water in the United States. Part I, Chap. II. (1909). 
Commissioner of Navigation. Annual Report. 
House Committee on the Merchant Marine and Fisheries. Ex- 
hibits published as an adjmict to Part I of the Hearings on 
Inquiry into the operations of the United States Shipping Board 
on July 24, 25, 29, 30, 31, 1919 (1919). 

Shipping Board, Port and Harbor Facilities Commission. 
Economies effected by the more rapid turn-around of vessels in 
United States PorU.— Prepared by T. W. Cleworth. (1919.) 



CHAPTER VIII 
■ MOTIVE POWER 

The romance of the sailing vessel. — On the basis of 
motive power ships may be divided into many classes, 
provided we include ships of all sizes and all ages. The 
muscular strength of man and beast, used to this day 
to move canal boats in many parts of the world, the 
power of river currents, which carried the primitive 
Coracle,^ and other forces must be mentioned. But in 
modern ocean transportation we rely on three forces 
only: wind, steam, and gas explosion. In each case we 
have a great variety of systems and devices by which 
these forces are harnessed and utilized. 

Although the hisitory of the sailing ship reaches far 
back into dim antiquity, the greatest progress in its de- 
velopment was made during the latter part of the 
nineteenth century. Strange to say, the sailing ship 
reached the height of its perfection at the very time 
when the demonstrated advantages of the steamer pro- 
nounced the doom of that picturesque and romantic type. 

The present generation is so accustomed to look upon 
the steamer as the only ocean carrier, that it is hard to 
believe that but thirty years ago the sailing vessel not 
only outnumbered the steamier but provided as well the 
larger tonnage. We note from the table given on page 134 

1 A primitive vessel used on the Severn, made of skins sewed over 
wooden ribs ; cf . in modern technology, skin of a steel ship, seams 
of wooden or steel ships, etc. 

1.33 



134 OCEAN SHIPPING 

that the sailing vessel reached the height of its evolu- 
tion after 1850 and did not begin to decline until after 
1880. As late as' 1890 sailing vessels 'had the advantage 
over steamers in regard to tonnage, and as late as 1896 
in regard to numbers. 

TONNAGE OF VESSELS OF OVER 100 TONS 

(Thousands of net tons) 

Sail Steam Sail Tonnage 
per cent of total 

1800 4,026 .. 100. 

1820 5,814 20 100. 

1830 7,100 111 98.5 

1840 9,012 368 96. 

1850 11,470 864 93. 

1860 14,890 1,710 89. 

1870 12,900 3,040 80.9 

1880 ;.. 14,400 5,880 71. 

1890 9,166 8,295 52.5 

1900 6,674 13,857 32.S 

1910 4,624 22,046 17.3 

1918-19191 4,120 2 27,019 13.2 

The rapid advance of steam is all the more pronounced 
when we consider that because of greater speed and 
regularity, the working capacity of the steamer is esti- 
mated to be four times as great as that of the sailing 
vessel — ton for ton. 

According to Lloyd's Register published October 13, 1920, 
of the world's total tonnage of 100 tons and upwards, re- 
corded by Lloyd's, 76 per cent use coal as fuel; 16.3 per 
cent are fitted to use oil as fuel for boilers; 1.7' use oil in 
internal combustion engines, and 6 per cent have sail 
power only. . ,,• .-../,,_ , : . 

iFrom Repertoire Gineral du Bureau Verit{vs,\9\&, 1919. • 
2 SO tons and upward. 



MOTIVE POWER 135 

Sail-tonnage under American flag. — Shipping under the 
American flag still contains a larger proportion of sail- 
tonnage than is the case of the merchant fleets of most 
countries. This is due to the fact that the American 
coastwise trade is restricted by law to American ves- 
sels only. The elimination of competition is responsible 
for the fact that a type of vessel, which in other fields 
of ocean shipping cannot withstand the modern steamer, 
still retains a certain portion of its former exclusive do- 
main. But in the United States also the sailing vessel 
is losing ground, the total steam tonnage having gtown 
from 1,837,200 tons in 1890 to 10,313,300 in 1919, while 
the corresponding sail tonnage decreased from 2,501,300 
in 1890 to 2,465,500 in 1919. 

Though the sailing ship is losing ground rapidly, it 
is as yet no "quantite negligeable" over which one may 
pass in silence. The least one should know about this 
fascinating craft are the general principles of classifica- 
tion by which the innumerable types, so bewildering to 
the landsman, are distinguished, and. the main features 
of the evolution which led to the adoption of these types. 

Classification of sailing craft. — There are three main 
criteria of distinction. One is the method of rigging 
the sails to the masts, the second the number of masts, 
and the third the number of yards on each mast. If 
the yards or beams to which the sails are attached are 
horizontally fastened at their center to the masts so that 
the two halves extend equal distances on each side, the ves- 
sel is called "square-rigged." In the "fore-and-aft rig," 
however, the yardarms touch the mast with one end, 
thus extending full length from the mast. If we sym- 
bolize a square-rigged mast by J2 and a fore-and-aft by 



136 



OCEAN SHIPPING 



Y we may give an elucidating classification of sailing 
vessels as follows: 



SYMBOLIZED CLASSIFICATION OF SAILING VESSEL 
TYPES 



TypeoFSailingVessel 


Square riqged 
Masts 


Fore-and-aPt 
rigged Masls. 


Lugger 


-- 






tt 




Ketch* 


-)- -- 




Brig 


"^ "f~ 




Ship 


-|- 4- 4- 




ir 


^ ^ 4=- 4^ 




'Bark 


+■ ■+- 


Y 


Brigantine 


4- 


Y 


Barkentinc 


-|- 


YY 


Sloop 




X 


Schooner 
( also Sharpie, 
BucK-eye,ietc) 




-Ljf. U P TO 


Schooner 




YY YYYYY 



1 In some ketches, fore-and-aft rig is used. 

Further modifications are possible by a combination 
of square-rigged and fore-and-aft rigged yards on the 



MOTIVE POWER 137 

same mast and by other minor changes. The early 
American schooner represented such a compromise be- 
tween the two methods of rigging. 

Evolution of the SEiiling vessel. — If we view these dif- 
ferent classes historically, the development is naturally 
from the simple to the complex, from the small 'type 
to the larger one, and since 1850, from the square-rigged 
to the fore-and-aft rigged. Thus different types pre- 
vailed at different times, changes being brought about 
by new requirements. 

The hull of the sailing vessel also underwent a con- 
siderable change. The high cabin structure above the 
deck aft, and the high forecastles which characterized 
the caravel type of the Columbus days had disappeared 
in the early part of the seventeenth century. For centuries 
hull construction followed the old theoiry that it did not 
matter how roughly a vessel entered the water as long as 
she left it smoothly behind her. The Baltimore clipper with 
her full round bows, practically flat forward floor and 
narrow stern typified this long-cherished idea. This 
old-fashioned design was boldly attacked in 1841 by a 
young New York draftsmian, John Willis Grififiths, who 
"proposed a model of a knifelike, concave entrance, melt- 
ing into an easy run to the midship section, where in- 
stead of forward, he located the extreme breadth of 
beams. Thence this fullness or breadth melted again 
into the after-end in lines almost as fine as those for- 
ward. In place of the codfish underbody he gave his 
innovation a dead rise amidships that marked him at 
once in the estimation of the shipbuilding fraternity as 
hardly less than a lunatic. A vessel of that sharpness 



138 OCEAN SHIPPING 

could not possibly stand up alongside a pier, let alone 
under sail." * 

The clipper ship. — After a healted controversy had 
raged for two years, the "Rainbow," constructed after 
Griffith's revolutionary design, was launched in the East 
River, New York, January, 1845. With that, a new era 
in shipbuilding had begun. The clipper ship was born, 
the ship that was to make the United States, temporarily, 
the mistress of the sea. The "Rainbow" was the first 
of "a fleet which was to make a starred banner the talis- 
man of the whole world's commerce." 

The clipper ship was designed for speed while the 
builders of the earlier type of sailing vessel had put 
carrying capacity uppermost. Speed became vital be- 
cause the potential competition of the steamer loomed 
up high as a threatening danger, especially in the North 
Atlantic traffic. Then, also, speed was vital in the long- 
distance trade with the Far East, where the younger 
merchant marine of America had to outdo its foreign 
rival. When gold was discovered in California a new 
incentive to speed was given. Later on, the Crimean 
War and the discovery of gold in Australia gave new 
employment to the builders and owners of 'lipper ships. 
It was during this era which was to last but a decade 
and a half, that a shipbuilding output was reached by 
American yards which remained unrivalled until the 
European war gave new life to that long neglected in- 
dustry. In 1855 no less than 583,450 gross tons of ship- 
ping were launched. 

The clipper ship represented the acme in the develop- 
ment of the square-rigged vessel. The schooner, the 

^William Brown Meloney, The Heritage of Tyre, p. 52. 



MOTIVE POWER 139 

must distinctive American vessel type, survived because 
of greater economy and efficiency. The sailing vesisels 
built in the United States have almost all been schooner 
rigged. With the use of steel hulls the sailing vessels 
reached a maximum development in the Thomas W. 
Lawson, a seven-m'asted schooner. Compared with the 
earlier types this was a monster vessel. "It had seven 
masts and measured 5,218 tons gross and 4,914 tons 
net. It could carry from 7,000 to 8,000 tons of cargo. 
The length over all was 375 ft., the beam 50 ft., the 
draft loaded 26 ft. The masits were 195 ft. high, the 
first 135 ft. being steel and the top 60 ft. wood. The 
maximum possible spread of sail was 43,000 square fit.,* 
an area about equal to an acre. Dummy engines were 
employed to handle the sails, to work the rudder, to load 
and unload the cargo, and for numerous other purposes. 
The vessel was as up-to-date in its appointments as is 
the most modern freight steamer, about the only differ- 
ence between the two vessels being in the motive power 
employed." ^ 

Sailing vessel and steamship compared. — The sailing 
ship possesses advantages in its free motive power and 
its relatively small, crew requirements. But these are 
more than offset by slow speed and uncertainty as to 
the time of delivery of the cargo. These two qualities 
of speed and regularity have become more and more 
important. The international exchange of goods is based 
on contracts made before the departure of the vessel. 

1 The German sailing craft "Preussen" had a maximum possible 
spread of 60,000 square feet according to J. Russell Smith, The 
Ocean Carrier. 

2 Johnson and Huebner, Principles of Ocean Transportation, p. 13. 



140 OCEAN SHIPPING 

Though the sailing vessel is being outclassed steadily 
by its more efficient rival, it is not to be assumed that it 
will vanish altogether. In two distinct services, its use- 
fulness will probably continue; in the coasting trade, 
which for some districts and some products is irregular 
and can not easily be organized into steamer service, 
and in the skirmish work of international trade, which 
must precede the establishment of new steamer connec- 
tions. But the long-cherished theory that the sailing 
vessel will remain the exclusive carrier of certain classes 
of bulky commodities on long voyages, such as the 
nitrate cargo from Chile to Europe, will have to be 
dismissed in the face of 'the recent development in these 
trades. 

The future of the sailer. — ^The future life of the sailing 
vessel will be prolonged by the use of auxiliary motors. 
The Literary Digest for April 10, 1920, published an in- 
teresting article which discussed this important subject 
in a novel and surprising manner. We giye the essence 
of the article by quoting a few paragraphs : 

"The sailing ship is to have a new lease of life. She held the 
seas until the late 70's, in competition with the ocean steamer, in- 
vented more than half a century earlier. Then came the day of 
lowered prices of fuel and machinery, and the sail began to vanish 
from the oceans. She has nearly gone, but now she is coming 
back. Steam is expensive; fuel is high; but the winds of heaven 
blow as of old. C. O. Liljegren, of Goteborg, Sweden, who makes 
this prediction in The Pacific Marine Review (San Francisco), tells 
us, however, that our present typt of auxiliary sailing ship is not 
a success. She needs more power and more sails. He sketches 
what he believes will prove to be the commercial carrier of the near 
future, which he names the "motor clipper." She will be half as 
fast again as the old clipper-ship and will carry twice as much; 



MOTIVE POWER 141 

while, in comparison with our present sailing-vessels, she will be 
thrice as fast and carry twenty-five per cent more. Her gross rev- 
enue should be no less than five times as great. 

"The reader may wonder why we should bother about the sail- 
ing ship when steamers and motor-ships are plentiful and more 
efficient than ever? Because, Mr. Liljegren tells us, coal and fuel 
are needed by industry, by land transportation, and by passenger- 
ships, and because statistics show that the day of the wind-driven 
ship is coming again. He explains : 

"The profit derived from a given ship is dependent on two 
widely different fundamental conditions : the size, form and effici- 
ency of the ship with its motor and propeller, and the general 
price-level. Part of the first condition has been indicated herein; 
it is the sphere where the skill of the designer and builder of the 
ship is paramount. But in the general price level, or state of the 
market, the action of man is practically excluded, at least as re- 
gards the individual. Only the concerted action of nations, as in 
great wars, has any effect on the price-level. 

"Now the general question — ^wind-driven versus machine-driven 
ships — is clearly decided by the price of fuel and machinery.' If 
coal and machinery were cheap enough, no sailing ship could exist; 
on the other hand, high price-level means high cost of fuel and 
machinery. At a certain point, machine-driven ships must be oper- 
ated at a loss and laid up, unless freight-rates rise too. And just 
here is the chance of the sailing ship— of the right kind." 

Improvements in steamship construction. — The rapid- 
ity with which the steamship has conquered the field is 
largely due. to the continuous process of perfection going 
on in the construction of the hull as well as of the marine 
engine. The former owes its development largely to the 
scientific study of the strength problem by means of the 
"girder theory," and to the labors of the classification 
societies which have shown how to combine strength 
wlith lightness. When the experimental tank method 
of research was put forward we obtained a definite means 



142 OCEAN SHIPPING 

of designing form and propellers, thus assuring a mini- 
mum waste of power and maximum useful application 
of the same. 

Evolution of the marine engine. — As to the marine 
engine, it was mentioned that the energy obtained from 
each pound of coal burned has been multiplied within 
a few decades. The story of this achievement is worth 
recounting briefly. Up to 1854, which year marks the 
successful introduction of the compound engine, the 
progress made was confined largely to such improve- 
ments which would assure higher steam pressure and to 
modifications necessitated by the transition from paddle 
wheel to screw propulsion, around 1840. 

In 1881 the introduction of the triple expansion type 
of engine meant another step forward. Its particular 
variation, known as the three-crank design — proved so 
successful that it has survived unchanged in all essen- 
tials to this day. Compared with this advance the adop- 
tion of the quadruple expansion engine since 1894 is of 
minor importance. On account of its greater running 
smoothness the quadruple engine has now superseded 
the triple expansion type for ships trading on long voy- 
ages and m'ore especially for passenger ships. In the 
case of cargo carriers, the triple expansion engine is still 
the rule. 

The coming of the turbine, — The difficulties of con- 
struction and management of very large units of recipro- 
cating engines, together with lessened prospects of fur- 
ther improvement in steam consumption led to the 
adoption of the steam turbine. Two types have been 
J most prominent in marine construction : the de Layal 
turbine of Swedish origin, and the English Parsons 



MOTIVE POWER 143 

type. The former was invented in 1883, the latter in 
1884. The turbine entered the Atlantic lists in 1905 and 
was firmly established by the phenomenal success of 
the Lusitania and Mauretania in 1907. A further im- 
provement was accomplished in the next year by the 
combined use of the reciprocating steam engine and the 
turbine, which retained the low speed of revolution of 
the reciprocating engine, with its accompanying favorable 
propeller efficiency, while at the same time effectively 
utilizing the expansion of the steam and the condenser 
pressure. In describing the machinery of the Britannic, 
the huge White Star liner lost during the war, its com- 
pany states: "The result (pi using the two types to- 
gether) is very much higher economy than is possible 
with the reciprocating engine only." 

To increase the steam efficiency in turbines, the same 
principle that marked the evolution of the reciprocating 
engine was applied ; namely, the compounding of several 
turbines together in such a way that the steam passes 
from one to the other. Several ships with a three series 
type have been put into service. 

Electricity's part in ship propulsion. — The usefulness 
of the steam turbine for marine propulsion has been 
jjreatly increased by the introduction of electric, hy- 
draulic and gear-wheel transmission. The outstanding 
difficulty in applying the turbine to ship propulsion has 
been that, while high speed rotation is necessary to ob- 
tain the maximum turbine efficiency, the propellers are 
most efficient at a very much lower speed. The trans- 
mission represents the bridge between the high speed 
turbine and the slow-running propeller. The progress 



144 OCEAN SHIPPING 

of the geared turbine ship is demonstrated by the follow- 
ing figures: 

Ships equipped with geared turbines, classed by 
Lloyds : 

1916-1917 23 new vessels of 153,805 tons. 

1917-1918 72 new vessels of 367,960 tons. 

1918-1919 183 new vessels of 1,051,302 tons. 

While the electric transmission^ is used on one or two 
of the largest units of the United States battle fleet, there 
are only four commercial vessels equipped with a turbo- 
electric plant, according to the latest Lloyds' Register, 
the largest of which is the Wulsty Castle of 3,566 tons 
capable of carrying 6,000 tons of cargo. In October 1920, 
the steamship Eclipse, the first American electrically driven 
general cargo earner was completed and delivered to the 
Shipping Board for charter to the American Line. She 
is of almost 12,000 dead weight tons, 440 feet long and has 
a beam of 56 feet. The old Powhatan, now the Cuba, has 
the honor of being the first electrically driven passenger 
liner. She is in the service of the Coast Steamship Com- 
pany. She makes about 175^ knots, running between Jack- 
sonville and Havana. 

The motor ship. — Before the turbine has reached the 
full limit of its potentialities, a new type of marine pro- 
pulsion is gaining in importance with almost incredible 
rapidity, i. e., the internal combustion engine, especially 
that of the Diesel type : 

"This type of engine was invented by Dr. Rudolf Diesel, a 
Bavarian engineer. The difference between an automobile engine 

iSee W. L. R. Emmet, "The Electric Propulsion of Ships," in 
The Electric Ship, General Electric Company, January, 1^0. 



MOTIVE POWER 145 

-and a Diesel engine is, generally, that all the fuel in an automobile 
engine is burned at once, while in a Diesel engine it is burned 
gradually, and so gives power more like the steam engine. Air 
is compressed in Diesel cylinders under great pressure, and then the 
fuel, consisting of crude petroleum or other heavy oils, is forced 
into the compressed air by greater outside pressure. This raises 
the temperature for the air in the cylinder and turns the oil into 
a gas." 1 

The fuel used by Dieseled ships is heavy oil. But oil 
can also be used and is increasingly being used in steam- 
ers, both in connection with the turbine and reciprocat- 
ing engines. The application of the internal combustion 
engine to marine propulsion is no new development, 
small engines for the purpose having been constructed 
thirty years ago. 

Especially since 1910, good progress has been made, 
and the following table of typical vessels shows the ad- 
vance in the size of motor ships: 



TYPICAL MOTOR SHIPS CONSTRUCTED DURING 1910-1918 
Vessel Year Tons Screws Cylinders 

Vulcanus 1910 1.179 single 6 

Selandia 1912 4,950 twin 16 



Siam 1913 5,296 

Fionia 1914 5,219 

Panama 1915 5,239 

Glenamoy 1916 7,269 

denary 1917 5,075 

Glenapp 1918 7,314 



16 
12 
12 
12 
12 
16 



There are two reasons why the development of the 
motor ship is at present very rapid, particularly in Eu- 
rope. In the first place, the apparent success of such lines 
as the Asiatic Company, the Glen Line and the North 

1 See Edward Hurley, When Coal Oil Johnny Goes to Sea, p. 65, 



146 OCEAN SHIPPING 

Star Company, which may be considered pioneers in the 
field, is attracting the attention of shipowners and in- 
vites emulation. Secondly, the increasing cost of coal, 
particularly in European ports, and the world-wide labor 
unrest, which causes delay in bunkering and unfavorably 
affects the operation of steamers, in general strongly 
emphasize the advantages of oil. Motorship, in a re- 
cent issue, reported on good authority that there are ap- 
proximately 130 seagoing motor ships, aggregating up- 
ward of 800,000 deadweight tons, now being built in 
Europe. Early 1921 reports to Lloyd's Register of shipping 
show that 454,000 gross tons of motorships are being built 
in the world at present. During 1920 there were launched 
in the world 190,000 gross tons of vessels fitted with in- 
ternal combustion engines. Most of these vessels are of the 
larger liner class. Perhaps the most remarkable feature of 
the new development is the whole-hearted way in which 
Great Britain has taken up the construction of this new type 
of vessel. Until recently the Scandinavian countries, 
stimulated by their well-known lack of coal, led in this 
new phase of marine construction. But now we read 
that not only has the greait Belfast ship-building firm of 
Harland and Wolf opened a new yard on the Clyde, de- 
signed for motor ships to the exclusion of others, but 
also that such firms as the Sir W. G. Armstrong and 
Whitworth Company of Newcastle, the Vickers Fetters 
Ltd. of Ipswich, and many others, are building motor 
ships. There are about twenty Diesel engine ships 
building in Great Britain, mostly of 10,000 tons dead- 
weight, but including four 13,000 ton ships for the Glen 
Line. 

The British Admiralty likewise seems fully aware of the 
possibilities of the Diesel engine. The late Lord Fisher, in a 



■MOTIVE POWER 147 

letter to the Times, September 1919, wrote : "Half the navy 
wants scrapping and the other half will be equally useless 
in a very few years, because of the internal combustion 
engine and oil," and a little further on he said: "The 
hearts of the Admiralty should be filled with the internal 
combustion engine." It is interesting to compare this 
recent staitement with the following words of another 
great English naval authority, Mr. "Winston Churchill: 
"Coal will continue to be the main basis of motive power 
in the line of battle for the present." And that was writ- 
ten fifteen years ago. 

American experience with Diesel-driven ships. — ^As far 
as this country is concerned, the adoption of the new 
engine during the war was considered inadvisjfble in 
view of the lack of workmen and engineers experienced 
in the building of such an intricate mechanism as the 
latest marine types of Diesel engines. Also the problem 
of finding the necessary number of skilled engineers 
capable of operating them was a handicap. However, 
since then a change has been brought about. The Bethle- 
hem Steel Corporation has developed a new type of marine 
Diesel engine .especially adapted to the peculiarities of the 
American situation. The following statement of Charles 
M. Schwab made in the New York Times of August 28, 
1920, speaks for itself : 

"It is a great pleasure for me to announce that the Beth- 
lehem Steel Corporation and the Bethlehem Shipbuilding 
Corporation, Ltd., have perfected a new two-cycle fuel- 
saving marine Diesel engine especially designed- for Ameri- 
can operating conditions and adapted to land use as well as 
cargo vessels of any size. In the science and practice of 
marine engineering this new engine represents a far greater 
advance over the oil-burning steamship than the latter is 



148 OCEAN SHIPPING 

over the coal-fired steamship. It is also regarded as a signal 
triumph for American engineering skill in a field hitherto 
dominated entirely by Europeans. 

"The development of the new Bethlehem fuel-saving 
Diesel engine represents two distinctive phases of advance 
in marine engineering. 

"1. For the first time an internal combustion heavy oil 
engine for either marine or land uses has been perfected 
which is not only designed and built by Americans but is 
built especially for Americans and is adapted to American 
operating conditions. 

"2. For the first time a two-cycle internal combustion 
heavy oil engine has been perfected which produces the 
same horse-power as a four-cycle engine practically twice 
its size and is at the same time adapted to large cargo ships, 
while saving two-thirds in fuel cost alone, as compared 
with steam-driven oil-fired vessels. 

"Neither of these developments is theoretically a new 
idea. For years Europeans have successfully operated large 
ships with Diesel engines. The achievement of Arthur 
West, the Bethlehem designer, who is at the head of our 
power department, is in the adaptation of the two-cycle 
engine to American operation and in its perfection for prac- 
tical use in cargo vessels of any size. 

"The success of this engine has already been demon- 
strated in two ways. It was installed and operated for 
ten months as part of the power plant of the Bethlehem 
Steel Corporation at Bethlehem, Pa. It was then installed 
in our new ore-carrying vessel, the Cubore, which today 
completed on regular schedule time its first voyage to Cuba 
and return." 

It is to be hoped that this initial success augurs well for 
the future of Diesel engine construction in America. 



MOTIVE POWER 



149 



Oil more efficient than coal, — Many of the advantages 
which the motor ship possesses accrue from the use of 
oil instead of coal. But that substitution is not charac- 
teristic of the motor ship alone, since oil is now used on 
many steamers under the boilers. We therefore refer 
to the next chapter in which these advantages are fully 
discussed. It should be borne in mind, however, that 
the motor ship emphasizes these savings to a consider- 
able degree as the following diagram shows: 

LBS. OF FUEL CONSUMED 



pen MORse-poweR-Houn 




Courtesy of Tidewater Oil Company. 



Advantages of the motor ship. — But there are features 

peculiar to motor ships. Above all, they dispense with 
the boiler, and therefore the carrying capacity is in- 
creased by the space and weight of that bulky piece of 
equipment, besides the weight of the water in the boilers. 
As far as the latter is concerned, it should be mentioned 
that modern steamers carry their own condensers, which 
reduces the quantity of fresh water which has to be 



ISO OCEAN SHIPPING 

carried. On the other hand, the motor ship needs a 
certain quantity of water to cool the engines. Also the 
Diesel engines are somewhat larger than the turbines 
or reciprocating engines, so that not all the space saved 
by the absence of boilers is net gain. 

There are also some minor advantages, such as the 
saving in the racing of propellers in heavy weather, the 
constant readiness of the ship to start and the possibility 
of very rapid manoeuvring, with full ahead to full astern 
accomplished in a few seconds. 

There can be little doubt that the motor ship has suc- 
cessfully passed the experimental stage and has come to 
stay. President W. C. Teagle, of the Standard Oil Com- 
pany of New Jersey, writes of the Diesel engine : 

"Its future is reasonably secure. Within a few years 
we should see this type of internal combustion engine 
consuming low grade oil, driving large vessels across 
the seas with wonderful economy in both operating force 
and fuel consumption." Also, to quote Mr. Edward N. 
Hurley : 

"With the motor ship we can have an entirely new 
era in ocean transportation. It calls for skill and effects 
economies that will yield good wages; and its flexibility 
and speed S'hould facilitate rearrangement of the world's 
shipping routes, so the seaman may get home more fre- 
quently and have a home worth getting to. 

"The motor ship is here. But it still needs develop- 
ment and application. Thus far it has been built chiefly 
in small tonnage freighters running at moderate speed. 
These have been highly successful economically; but 
there are still certain shortcomings in machinery and 
organization to be dealt with. 

"The Diesel engine must be freed of some defects that 



MOTIVE POWER ISl 

have appeared under the stress of ocean voyages, and 
must also be built in larger units to furnish greater 
horse-power for bigger ships running at higher speed. 
The problems now are entirely questions of engineer- 
ing, and American ingenuity should prove adequate to 
develop the fast motor liner for passenger traffic." * 

1 E. N. Hurley, When Coal Oil Johnny Goes to Sea, p. 6. 

REFERENCES 

Clark, A. H. The Clipper Ship Era, 1&43-1%9. (1911). 
General Electric Company. The Electric Ship. (1919) 
Hurley, E. N. The New Merchant Marine. Chap. XV. (1920). 

When Coal Oil Johnny goes to sea. (1918). 
Johnson and Huebner. Principles of Ocean Transportation. Chap. 

I-IV. (1919). 
KiRKALDY, A. W. British Shipping. Book I. (1914). 
Meloney, W. B. The Heritage of Tyre. (1917). 
ScHOLZ W. Die Stellung der Segelschiffahrt zur Weltschiffahrt und 

Technik. (1910). 
Standard Oil Company of New Jersey. Fuel oil Installations. 
Tide Water Oil Company. Fuel Oil. (1919). 



CHAPTER IX 

RECENT TENDENCIES IN THE DEVELOPMENT OF 
THE CARRIER 

War emergency prompts invention. — "Necessity is the 
mother of invention," and never was there a direr ne- 
cessity pressing upon the shoulders of mankind than 
that which the Great War brought in its train. For a 
time the greatest need . seemed to be men, then it was 
guns, then shells, but probably the loudest cry went up 
for ships and more ships. Ordinary means proved in- 
adequate to satisfy the extraordinary demand. So the 
war necessity set the inventive genius of man to work 
to produce new means. 

Nowhere was progress in ship construction more rapid 
than in this country, where existing shipbuilding facili- 
ties were as inadequate as potential expansion was enor- 
mous, and where the lack of the former could be filled 
from the surplus of resources with which this country 
is blessed. 

The pressing need of ships affected shipbuilding in 
two ways. It led to new methods of construction and 
it stimulated experimentation with and application of 
new materials and prompted a wider use of materials 
formerly known but despised. 

The economic background of the standardized ship. 
— The magnitude of the emergency construction task, — 
that is, of the task of providing tonnage to move mil- 
lions of soldiers, their equipment, food, etc., and to re- 
place the enormous war losses, — was such that existing 

152 



TENDENCIES IN CARRIER DEVELOPMENT 1S3 

expedients were utterly insufficient. Existing yards, 
though enlarged, were crowded with work for the navy 
— mainly destroyers, submarine chasers, etc., — and with 
private orders. The shortage of trained shipworkers 
was such that when a Pacific yard had just succeeded 
in getting a train-load of riveters, etc., out to the coast, 
Atlantic yards would fetch them all the way across the 
continent to do their work. Moreover, the output of 
ship steel for many months in advance had been allotted 
to the existing yards for merchant work then under 
way, and for naval requirements. To the shortage of 
labor and material should be added the limitation of 
experience in shipbuilding, organization, etc. In the face 
of this, the United States was called upon to furnish an 
amount of tonnage, such as no country, not even Eng- 
land, had ever built in its record year. 

The overburdened condition of the shipbuilding in- 
dustry was in sharp contrast to the condition prevailing 
in other quarters. Owing to the standstill in the build- 
ing industry, and because of the cutting off of their 
material, many steel shops for structural and bridge 
work were idle. If a way could be devised whereby they 
could be set to work to build parts of ships, to be trans- 
ported by rail to great assembling shipyards, two dif- 
ficulties could be overcome at one time. And that is 
what happened. The "fabricated" ship, also called the 
structural sited standardized cargo vessel, was the solu- 
tion which saved the situation. 

Mr. Redfield proposes ship standardization. — In a let- 
ter written by the Shipping Board to the Senate Com- 
mittee of Commerce, May 5, 1917, credit is given to 
Ex-Secretary of Commerce Redfield, for having first 
proposed the scheme. We quote: 



154 OCEAN SHIPPING 

"A reasonably careful investigation among the steel 
manufacturers has proved the feasibility of the scheme 
proposed by the Secretary of Commerce several years 
ago for the fabricatiop of the greater portion of the ma- 
terial entering into steel vessels at the many great fab- 
ricating plants of the country, and their assembling into 
the structure of the vessel at the seaboard or on the 
Great Lakes. A great bridge-building corporation, which 
has successfully met the competition of the entire world 
in a number of its enterprises, has seriously proposed to 
us to "build 100 ships of over 3,500 tons dead-weight 
carrying capacity, the first to be delivered within six 
months and one ship a day thereafter. They plan the 
utilization of Secretary Redfield's scheme of standard- 
ized fabricating and assembling the parts thereafter at 
the shipyard." 

Engineering aspects of standardized ship construction. 
— In May, 1916, the Department of Commerce issued a 
booklet entitled, Standardization in the Construction of 
Freight Ships, written by E. Piatt Stratton, a consult- 
ing engineer for the New York Board of Underwriters 
and formerly Supervisor of the American Bureau of 
Shipping. We quote the opening paragraph, as it sums 
up the general argument: 

"Signs multiply of a disposition in the United States 
so to standardize the construction of cargo types of 
steamships as to greatly reduce their cost. This ten- 
dency is to be encouraged in every way possible, since 
its successful development will go a long way toward 
making the United States entirely independent of other 
countries in the construction of ships for its foreign 
carrying, as the country always has been independent 
of foreign countries in the construction of ships for its 



TENDENCIES IN CARRIER DEVELOPMENT ISS 

domestic carrying." The pamphlet concludes with an 
excerpt from the Marine Engineer and Naval Architect 
of London, April, 1916, which shows that in England 
also naval builders were aware of the possibility as well' 
as of the advantages of this plan. 

English psychology against ship standardization. — 
But in those days the main argument was cheapness. 
This, however, was superseded in 1917 by the crying 
need for speed and quantity production. Prompted by 
these forces the Governments both of the United King- 
dom and the United States adopted standardized con- 
struction as the ofificial method. But in England con- 
ditions were very much less favorable to the plan than 
in the United States. The British mind is individualistic 
and abhors standardization. Fairplay voiced this horror 
as follows: 

"The principle "of standardization is a deadening, soul- 
destroying thing. It crushes individuality of design in 
production, just as it kills out individuality of perform- 
ance among workmen." * 

And' again, Walter Runciman, a British shipowner, 
said: 

"Put an end to the fandango moonshine of standard- 
ized ships, which nine-tenths of the people who use the 
phrase imagine to be an up-to-date, progressive inven- 
tion, whereas the type is wholly reactionary." ' 

Nevertheless, the British Government went ahead with 
its program, convinced that time, labor and material 
could be saved in this way. But the plan reached much 
larger proportions in the United States, where fabricat- 



i Fairplay, Sept. 13, 1917, p. 448. 

2 Glasgow Herald, Dec. 29, 1917, p. 36. 



156 OCEAN SHIPPING 

ing yards were created whose annual building capacity 
exceeded the maximum annual output of any nation. 

Fabricating methods explained by Mr. H. R. Sutphen. 
^-The substitution of fabricating methods for regular 
shipbuilding practice involves important changes in con- 
struction. Without going into technical details we con- 
tent ourselves with quoting a statement of Mr. Henry 
R. Sutphen, the Vice-President of the Submarine Boat 
Corporation, read at the twenty-sixth general meeting 
of the Society of Naval Architects and Marine Engi- 
neers, held in Philadelphia, November 14 and 15, 1918: 

"Our problem was . first to use commercial structural 
shapes and plates that could be had in large quantities, 
and design the ships so that these could be assembled 
with a minimum of alteration through bending, and next, 
that the plans should be so developed that the bridge- 
builder and the structural shops should have no diffi- 
culty in reading the drawings and adapting their ex- 
perience and equipment to the fabrication of parts for 
ship construction. The naval architect had to speak 
and draw in terms familiar to the great army of struc- 
tural steel workers, requiring some radical modifications 
in the matter of classification details, and imposing 
rather pronounced departures from the ordinary ship- 
shaped models, in order that the materials at hand might 
be incorporated in the most efficient manner for maxi- 
mum production and accuracy of fit. In brief, this ne- 
cessitated the elimination of curves and the substitution 
of straight lines and angles wherever possible. 

Many modificaitions and innovations necessary. — "The 
decks are without camber and generally without sheer, 
the sides throughout the length of the parallel body are 
perpendicular, the bottom is flat, and is merged with the 



TENDENCIES IN CARRIER DEVELOPMENT 157 

sides 'by a short and abrupt curved bilge. By eliminat- 
ing the deadrise characteristics of the vessel it was pos- 
sible to adopt a uniform size of floor throughout the 
parallel body and to have recourse to longitudinals which 
would all be of the same height. Forward and aft of 
the parallel body the model subscribes with reasonable 
closeness to that of the accepted design of ocean-going 
carriers. 

"So far as the straight parts of the parallel middle 
body, flat tank tops and flat decks were concerned, it 
was an easy matter. It was simply a case of making 
detail drawings exactly as they would be made for a 
railroad bridge, giving definite location by dimension 
of every hole, rivet, and each piece of steel. In all, 
some 330 drawings were made of details of ihuU fabri- 
cation. From these drawings all the steel was ordered 
from the mills exactly to the length required. In the 
molded portion of the ship, however, the problem be- 
came more complicated to the bridge engineer, as this 
section of the shell could not be mathematically de- 
veloped. Such plates and shapes were developed full 
size on the mold-loft floor, reproduced on template paper, 
having all rivet holes punched in them on proper gauge 
lines and for a matter of record carefully measured up 
and detailed to dimension on individual drawings. Even 
with complete drawings it was difficult for the fabricat- 
ing shops to reproduce the plates on account of the edges 
and gauge lines being curved. These lines could only 
be located by dimensioning a series of points on the 

curves. 

"As we could not count upon two men springing a 
batten and getting the same shape between two points, 
we overcame this phase of the problem by sending tern- 



1S8 OCEAN SHIPPING 

plates of the shell plates in the molded sections to the 
fabricating companies. These templates, made on tem- 
plate paper approximately 1/32 inch thick, were direct 
copies of the original template developed on the mold- 
loft floor. A difficulty was experienced in the shrinkage 
and expansion of these templates, and to insure the 
change of shape of the templates, causing no miisfits, 
each template was marked before being sent out with 
certain dimensions. To begin with, the paper used is 
fairly heavy fabroid material, which has a rather low 
coefficient of expansion. It was then marked and cut in 
accordance with the development on the scrive board, 
and rivet-holes, etc., were laid out upon the paper, spaced 
and dimensioned with great accuracy." 

Rail transportation of parts affects construction. — But 
that was not all. Rail transportation had to be con- 
sidered also. Thus smoke-stacks, if they were to be 
manufactured .in inland structural shops, had to be so 
designed that their maximum diameter came within the 
width of an ordinary gondola car. The size of tunnels 
was another factor for which allowances had to be made. 

Nevertheless, in the case of the boats of the Submarine 
Company, 96 per cent, of the total weight of the hull was 
fabricated at outlying establishments, while 100,000 of the 
4,270,000 rivets, were driven in at inland factories, where the 
work was done on a more economical basis. Chairman 
Hurley stated before the Senate Committee on Commerce, 
on December 21, 1917: "In the case of a fabricated ship, 
they lay the keel in a^ shipyard, and the old way was to 
bring all the plates there and drive the rivets on the 
framework. This plan is to have forty or fifty outside 
shops put two plates together and drive the rivets and 



TENDENCIES IN CARRIER DEVELOPMENT 159 

bring the plates to the shipyard and put the plates on; 
and 50 per cent, of the riveting is done outside." 

The whole nation contributes to work of the fabricat- 
ing yard. — Twenty-eight steel mills supplied material to 
fifty-six fabricating plants, not to mention the contribut- 
ing labors of two hundred foundries, machine, pipe, 
joiner and equipment shops. We reproduce here a map 
which shows the various plants which contributed parts 
to the Hog Island yard. This map, better than a long story, 
reveals the gigantic task which those who organized and 
coordinated this work had to face. And Hog Island was 
only the biggest of several shipyards which worked along 
the same principle. The American International ship- 
building Company yard at Hog Island, the Subma- 
rine Boat Corporation yard at Newark Bay and the Mer- 
chant Shipbuilding Company yard at Bristol, Pa. (near 
Trenton, N. J.), were the three great establishments 
where fabricated ships were built for the United States 
Shipping Board Emergency Fleet Corporation. The 
map on page 160 shows the routes of steel from mills 
to fabricators and from fabricators to Hog Island. 

The record of the fabricated ships. — The important 
question now is : how do these ships compare in regard 
to operating economy and efficiency with the regular 
type of ship? This question is hard to answer in view 
of contradictory statements in contemporary literature. 
However, the facts that both Lloyd's and the American 
Bureau of Shipping gave these ships the highest rating, 
and that the Submarine Boat Corporation, according to re- 
cent reports, is willing to risk its money in continuing on its 
own account the building program which the United States 
Shipping Board cancelled, seem to indicate that they ought 
to be useful additions to the world mercantile fleet. The 



160 



OCEAN SHIPPING 




TENDENCIES IN CARRIER DEVELOPMENT 161 

tests made at the Government Model Experimental Sta- 
tion disclosed that the ships are raither economical in 
their propulsion requirements. Many are oil-burners 
and carry their fuel in double bottoms. It seems cer- 
tain that standardization, quantity production, and con- 
tinuous process principles must lead to economies 
through reduced overhead, greater efficiency of special- 
ized working crews, large scale purchases of material, 
and above all through the influence of repetition in the 
production of parts, unless they are ofifset by drawbacks 
such as the following: 

Drawbacks of ship fabrication. — Drawbacks * of fab- 
ricating vs. building ships. 

(1) Operations to allow large scale production tend 
to grow too big, necessitating much red tape and 
excessive checking up. 

(2) High cost of transportation in assembling parts 
owing to : 

(a) long freight hauls from widely scattered mills. 

(b) high freight charges on set-up ship parts as 
compared with ship plate. 

(3) Waste, owing to necessity of installing" large 
warehouses where materials are apt to become 
jumbled. 

(4) Inefficiency of fabricators. 

(5) Difficulty of adjustment. 

(6) Idle capital tied up owing to impossibility of con- 
tinuous process. 

1 Based largely on a statement given out by Charles M. Schwab, 
of the Bethlehem Steel Corporation, for a time in charge of the 
Emergency Fleet Corporation. (See Nautical Gazette, March 13, 
1920.) 



162 • OCEAN SHIPPING 

On the whole, modern tendencies in ship construction 
seem to call for such specialization of construction that the 
place for the standardized ship is undoubtedly limited. 
This is also the conclusion voiced by one of the leading 
shipbuilders of Europe, Dr. E. Foerster of Hamburg, in his 
valuable paper on "Wirtschaftliche Konstruktionsfragen im 
kiinftigen Schiffbau" (November 1919). 

The rivetless ship. — The efforts to speed up ship pro- 
duction have led to another innovation in shipbuilding, 
the introduction of the rivetless or welded ship. For 
ship repairs, thermit welding had the official approval 
of both Lloyds and American Bureau of Shipping; but 
it remained for the war need to lead to the attempt at 
dispensing with the riveter, or at least partly so. This 
new type of vessel is claimed to be: 

(1) lighter, because the weight of the rivet head is 
saved; the necessity of heavy buttressing to off- 
set the weakening: due to the rivet holes is ob- 
viated. 

(2) stronger, because the danger of tearing asunder 
along the row of rivet holes is eliminated. 

(3) more water-tight. 

Lord Pirrie, British Controller-General of Merchant 
Shipbuilding during the war, is reported as satisfied with 
the feasibility of this new system of building. The 
United States Shipping Board has been in close touch 
with experimental work and is making arrangements for 
the building of a number of 10,000-ton standard ships 
in which the use of rivets will be reduced to about 2j4 
per cent, of the number usually used {Scientific Ameri- 



TENDENCIES IN CAkRlER DEVELOPMENT \6i 

can, September 28, 1918). In the second annual report 
of the Shipping Board we read the following: 

"In order to eliminate as far as possible the laborious 
process of riveting, the possibilities of electric welding 
have been carefully studied by a committee of experts, 
and this work has been so far developed that it is now 
possible to weld many of the steel parts of a ship. A 
notable saving in the weight of the ship is thus made 
possible, as well as the cheapening and hastening of 
production." 

The Isherwood System. — Anothef system of construc- 
tion, the "Isherwood" or longitudinal system, wihile not 
a result of the war, was more generally adopted because 
of its increased efficiency and of its economy of material 
and of labor during construction. 

The advantages of this system which, as the name 
implies, lays stress upon the longitudinal line and sets 
the transverse frames and beams at widely spaced in- 
tervals, generally twelve feet, are summed up as follows : 

"In summing up, therefore, it is quite evident that in 
the 'Isherwood' system is to "be found a method of 
constructing ships which, compared with the transverse 
system, provides, without extra cost to the owner, a 
much stronger and more scientifically constructed ves- 
sel, which carries a considerably increased deadweight 
on the same draught, eliminates wear and tear due to 
vibration, reduces the cost of maintenance, and presents 
a greater resistance to damage, besides possessing many 
more advantages of which the foregoing are but a few." * 

The following statistics show the extent to which this 
1 See Fairplay, February 1, 1917. 



164 OCEAN SHIPPING 

longitudinal system' of ship construction has progressed and 
the number of ships ordered during each particular year : 

Year No. of Ships Deadweight Capacity 

1908 6 31,608 tons 

1909 30 1^1,384 tons 

1910 40 271,760 tons 

1911 64 474,043 tons 

1912 100 818,553 tons 

1913 30 215,686 tons 

1914 41 358,288 tons 

1915 157 1,196,899 tons 

1916 152 1,117,779 tons 

1917 180 1,655,693 tons 

1918 250 2,364,778 tons 

1919 ". . 210 1,887,079 tons 

Totals 1,260 10,573,550 tons 

The Denman-Goethals Controversy. — The rush to get 
ships, coupled with the enormous strain upon the steel 
industry of the country due to the war needs not only 
of the United States, but also of the allied countries, 
prompted shipbuilders ^o turn from steel to other mate- 
rials as far as possible. In the first place we witnessed 
the temporary revival of the wooden shipbuilding indus- 
try, which became so notorious through the unfortunate 
controversy between Chairman Denman and General 
Goethals. When the storm of that discussion had sub- 
sided, it was found that while the steel ship is undoubt- 
edly far superior, the shortage of tonnage existing up to 
the armistice was such as to justify the building of 
wooden ships wherever this could be done without in- 
terfering, through division of capital, labor and manage- 
rial talent, with the steel ship program. As far as labor 
is concerned, wood shipbuilding, on the whole, draws 
upon sources of supply different from those used in steel 
ship construction. 



TENDENCIES IN CARRIER DEVELOPMENT 165 

For a while, much was heard about composite ships, 
i.e., vessels with steel frames and wooden sheathing. 
Their career, however, was short-lived, as it was found 
that they cost almost as much as the all-steel ships with- 
out possessing many of their advantages. 

Experiments were also made with cast-iron ships. 

The concrete ship. — The war, furthermore, lent consider- 
able impetus to the construction of concrete vessels. 
Experiments with "ships of stone" had been made as 
early as 1849, when a Frenchman built and patented a 
concrete row-boat.^ But until comparatively recent times, 
few people knew of the consideration that had been given 
to the building of concrete boats, barges, ships and other 
floating constructions. It was again the ship shortage, 
caused by the war, which put the concrete ship on the 
map, that is to say, assured, it of world-wide attention 
and earnest consideration by the various governments. 
In the Second Annual Report of the United States Ship- 
ping Board we read that contracts for forty-two con- 
crete ship hulls were let, out of a total tonnage of 
approximately 300,000 tons. The reason which the Ship- 
ping Board gave for limiting the program to this figure 
was not fear of failure — it stated expressly that "the 
practicability of the concrete ship as an emergency 
agency has been established by investigation and experi- 
mentation" — but the fact that the hull-producing capac- 
ity of the country in steel and wood ships was in excess 
of what may be termed the power and equipment pro- 
ducing capacity for fitting out these ships. 

Much of the recent advance is due to the success of 
the concrete experts in working out a concrete aggrega- 
tion which is so light that it floats on water and yet has 

^Scientific American, August 31, 1918, p. 165. 



166 OCEAN SHIPPING 

Strength and toughness greater than that of the gravel 
or stone which is generally used. 

Advantages of concrete ships. — The advantages 
claimed for the concrete ship have been summarized 
as follows: 

"Concrete ships are fireproof. 

Wood-boring worms cannot attack the hull. 

Concrete ships are rat-proof. 

Concrete ships require practically no maintenance. 

'Construction methods are economical and the cost is low. 

Concrete ships can be built quickly. 

Concrete ships will neither rot nor rust. 

Calking, painting, and similar maintenance of the hull is un- 
necessary. 

Concrete ships will withstand very rough usage. 

Materials required may be obtained readily anywhere at low cost. 

Less labor is required and cheaper labor may be employed. 

There is no likelihood that the hull of a properly constructed 
concrete ship will buckle. 

Because of the smooth surface and the absence of angular pro- 
jections, skin friction is greatly reduced. 

Concrete vessels may be floated before completion. 

■Concrete vessels are lighter than similar ones of wood. 

Barnacles and other sea growths find conditions unfavorable to 
their growth." ^ 

It may be borne in mind that this compilation was 
made by the Portland Cement Company, a body by no 
means disinterested in the wide adoption of this scheme. 

The record of the "Faith." — The largest concrete ship 
built is the "Faith," launched in March, 1918, by the 
San Francisco Shipbuilding Company. The following 
description covers the most important details :^ 

1 Concrete Ships, a Possible Solution of the Shipping Problem, 
published by the Portland Cement Association, December, 1917. 

2 J. R. Smith, Influence of the Great War upon Shipping, p. 235. 



TENDENCIES IN CARRIER DEVELOPMENT 167 

"It is ten times larger than any concrete vessel on 
record in the United States. The vessel is 320 feet long, 
44yi feet vi^ide, 30 feet deep and draws when loaded 24 
feet. The floor has a thickness of 4j4 inches and the 
walls of 4 inches. She weighs 600 tons more than a 
steel vessel of similar capacity. The six bulkheads and 
the deck are also made of concrete. The bottom of the 
vessel is covered with a wooden water-tight floor. Dis- 
placement is 7,900 tons; carrying capacity, 5,000 tons. 
Five hundred and forty tons of steel reinforcing in the 
form of bars and a basket work of steel mesh were used. 
The bars were welded together, thus reducing to a mini- 
mum the quantity of steel required by avoiding laps 
that otherwise would have been necessary. The engines 
are oil-burners of 1,750 horse-power. The speed of the 
vessel is 10-11 knots, 160 barrels of oil a day being con- 
sumed. In the designing of the vessel no provision was 
made for water ballast, as the designers believed that 
the heavy concrete floor would make the vessel ride 
evenly. The vessel was launched on March 14, exactly 
as previously announced, and just six weeks after the con- 
crete was poured. She was fully equipped by May 1, 
passed her trial trips satisfactorily and went to work 
early in May. The cost of the vessel was $750,000, a 
large part of which is due to the fact that it was a first 
attempt." 

Classification of concrete ships. — On the basis of con- 
struction two main types are distinguished, the mono- 
lithic and the unital ship. The former is moulded and 
when finished appears as one piece of concrete. In the 
case of the latter, different parts are moulded independ- 
ently and afterwards put together. 



168 OCEAN SHIPPING 

An important measure of the success of the new 
method of ship construction is the rating given to it by 
the great classification societies, principally Lloyds. This 
conservative and authoritative body gave the highest 
rating to a number of reinforced concrete ships, although 
placing them in an experimental class which involves 
the necessity of renewing the rating at the end of a year 
or voyage, as the case may be. 

If the fact that the Shipping Board Emergency Fleet 
Corporation cancelled all those contracts for concrete 
ships wihich could be given up without incurring too 
great a loss, is to be taken as a criterion for the perman- 
ency of the concrete ship's success, its immediate future 
is not overbright. However, further improvements in 
producing the material itself and in applying it to ship 
construction, coupled with the abnormal rise in the price 
of steel, could turn the tables to the new comer's ad- 
vantage. 

Special vessel types. — There is another phase of de- 
velopment to be considered here which did not receive 
its stimulus from ship shortage but which is a con- 
comitant of the general progress in ship construction, 
and a response to the more exacting demands of com- 
merce. We refer to the increasing use of ships built 
for specific trades, ships equipped with special installa- 
tions to enhance their usefulness by reduced turn-around, 
better utilization of cargo space, and greater attention 
given to the handling of cargo. 

The most conspicuous of these specialty ships is the 
oil tanker. We had occasion to mention the enormous 
increase of this type of carrier during the war. In view 
of the extraordinary importance of the tank steamer of 
to-day, its history is interesting. 



TENDENCIES IN CARRIER DEVELOPMENT 169 

The evolution of the tanker. — The early method of 
shipping oil in forty-gallon barrels was dangerous and 
not economical, — dangerous because in cases where stor- 
age was faulty the barrel "got a roll on it" ; — not econ- 
omical because of the lost space, amounting to practically 
half the loading capacity of the ship. The four-gallon 
tin cases, twos or fours packed in wooden cases, effected 
a more economical stowage. Steamers were especially de- 
signed for the transport of oil in cases. But the loading 
and unloading of barrels and cases alike was a tedious and 
expensive factor ; expensive not merely because of the labor 
cost, but perhaps more so on account of the vessel's time 
wasted. To discharge a vessel loaded with 10,000 barrels of 
oil required at least four days. 

Difficulties of bulk transportation. — The carrying of 
oil in bulk proved to be the solution, but not until num- 
erous difficulties had been overcome. Petroleum ex- 
pands easily under the influence of rising temperature, 
approximately at the rate of 1 per cent per 20 degrees 
Fahrenheit. On a sea voyage variations in temperature of 
from 40 to 50 degrees are not unusual, which would 
more than suffice to burst open the fully loaded and 
sealed tanks. 

"To provide for the expansion of oil due to increase 
in temperature and to prevent explosion due to the form- 
ing of gases, each tank is also fitted with an expansion 
trunk. Some tank vessels are very large, having numer- 
ous deep oil tanks, additional 'summer tanks' between 
the main and afterdecks for tihe stowage of oil during 
the warmer seasons, and a cargo hold as well as addi- 
tional spaces below the 'shelter deck' for the transporta- 
tion of miscellaneous freight cargoes other than oil." ^ 
^Johnson and Huebner, op. cit., p. 44. 



170 OCEAN SHIPPING 

On the other hand, contraction would create empty 
spaces, equally dangerous in rough weather. The in- 
flammability of petrol, and the ease with which it pene- 
trates tihe least opening, severely tested the builders' 
skill. The danger from the explosion of the very vol- 
atile gas which remains long after the petroleum has 
been removed, was another obstacle to be conquered. 
Even to-day many problems of the tanker await their 
solution; thus the greater movement of liquid cargo 
ofifers many unpleasant surprises to those who have to 
navigate the ship. 

Tank tonnage grows rapidly. — All the more remark- 
able is the rapid evolution which began in 1886 ^, when 
the first specially constructed tank steamer "Gliickauf" 
was built in Newcastle-on-Tyrie, for Mr. Riiedmann of 
Geestemtinde, Germany, who is the pioneer in this field. 
It is amusing to compare the 2,600 tons of oil which this 
prototype could carry, with the latest tankers, ordered 
by the Standard Oil Company, which are to have a dead- 
weight capacity of 20,500 tons, enabling them to carry 
140,000 barrels of petroleum, or with the largest tanker 
afloat at this time, the "San Fernando" of the Eagle 
Oil Transport Company of London, which has a dead- 
weight capacity of 18,000 tons. At the end of 1920, the 
world's tanker fleet, according to Lloyd's Register, consisted 
of 709 power driven vessels and 124 sailing ships with an 
aggregate gross tonnage of 3,500,000 tons. 89 per cent of 
this fleet is owned by the United States and England. 

1 Mention might be made of the fact that in 1873 two vessels in the 
Philadelphia-Antwerp service were equipped with tanks for bulk oil 
but the danger to the passenger service caused the disuse of the 
tank feature. See S. Fry, History of North Atlantic Steam Navi- 
gation, 



TENDENCIES IN CARRIER DEVELOPMENT 171 

About 250 additional tank vessels are building to-day and 
when the tankers now under contruction are completed 
the tanker fleet of this country will total 390 vessels, while 
that of England will embrace 315 ships.^ 

There are other tank vessels besides those carrying 
petrol. Thus, to quote one example, the American Sugar 
Refining Company at present owns a steel tanker with 
a capacity of 750,000 gallons of bulk molasses, which 
operates between the West Indies and the United States. 
The same company has under construction a steel tank- 
er with a capacity of, approximately 1,250,000 gallons. 
This vessel deserves particular attention because it is 
intended to be a combination tanker and cargo steamer. 
We quote the following details from the Nautical Gazette 
of April 10, 1920: 

"This vessel will be of 6,300 tons deadweight, her dimensions being 
as follows : Length, between perpendiculars, 360 feet. ; breadth, 
SO ft. ; and depth, 29 feet. The specifications call for a single screw 
steamship with straight stem and elliptical stern, constructed on 
the longitudinal system of framing. 

The machinery will be located in the after end of the ship, pro- 
vision being made for separate engine and boiler rooms, aft of the 
pump room. The section of the vessel's double bottom directly 
beneath the machinery is to be divided into compartments for the 
carrying ot feed water. The hold will be divided into six tanks 
for the carrying of oil or molasses in bulk or general cargo, the 
fuel tank being located between tanks, numbers 3 and 4. The center 
line bulkhead extending to the upper deck will divide the tanks into 
port and starboard compartments, while the wing spaces between the 
main and upper decks will be divided into four summer tanks. 

The vessel will be constructed with large hatch openings, and 
equipped with two steel Sampson posts for the' expeditious handling 
of cargo." 

1 See Nautical Gazette, February 5, 1921. p. 179. 



172 OCEAN SHIPPING 

This utilization of a tanker for the triansportation of 
general cargo is of special interest. But, as yet, this is an 
exceptional case. It is an experiment. 

Among the most interesting innovations in the line of 
tank vessels are the combination oil and ore vessels which 
the Bethlehem Steel Corporation is said to be constructing 
for the Chile service of the Ore Steamship Company, a 
Bethlehem subsidiary. The new steamers, illustrated on 
page 173, have the following characteristics : length over-all, 
571 feet, 6 inches ; length between perpendiculars, 550 feet ; 
breadth moulded, 72 feet; depth moulded, 44 feet; draft 
loaded designed, 32 feet 4 inches ; draft light estimated, 10 
feet, 9 inches; block coefficient, 0.817; midsection coefficient, 
0.989; longitudinal coefficient, 0.826; speed knots loaded, 
Uy2; cruising radius knots, 13,000; framing longitudinal; 
class A-1 American Bureau of Shipping; deadweight capa- 
city, 20,500 tons; displacement, 28,830 tons; complement, 
officers and crew, 53.* The plan is to utilize the full dead- 
weight capacity both ways by oil on the voyage to Chile and 
by ore when coming back. 

Drawbacks of tank vessels. — The great drawback of 
the tank vessel is its exclusive usefulness, i. e., it is 
limited to the one liquid bulk commodity for which it 
is constructed. (Only in the rarest cases is the carry- 
ing capacity utilized' in both directions of a voyage). 
Only occasionally a cargo of pig-iron or of similar nature 
is picked up. Whether experiments in the carrying of 
cocoanut oil on the return voyage will lead to a complete 
success is so far questionable. But exactly in this one- 
sided employment lies the secret of the success of the 
specialty ship. The idea is to build an ideal ship for 

1 Marine Review, April, 1921, p. 161. 



TENDENCIES IN CARRIER DEVELOPMENT 173 

COMBINATION OIL AND ORE VESSEL 



•"" <^' >..>^r..«..i 




MIDSHIP I SECTION 



J 



Courtesy Marine Review. 

NEW CARRIER SHOWS RADICAL HULL DESIGN 

Combined freighter-tanker for steelmaking interests departs widely 

from accepted ship designs. Either bulk or liquid freight 

will orovide full deadweight cargo 



174 OCEAN SHIPPING 

one particular cargo and turn it around so fast by means 
of mechanical loading and unloadijig devices — ^pumps 
in the case of tank vessels — that the net result is better 
than could be achieved by the old fashioned tramp, which 
was built to suit the greatest number of tasks imagin- 
able. 

Coal and ore vessels. — This modern tendency to em- 
ploy specialty type is spreading. Many years ago it in- 
vaded the British coal trade, especially the Eastern coal 
trade, with near-by continental poi*ts. Self trimming 
colliers with mechanical loading and unloading devices 
made their appearance and successfully competed with 
the old-fashioned tramp. The Ore Steamship Company, 
a Bethlehem Steel subsidiary, with its fleet of "cubore" 
ships, is making the round trip between Cuba and Balti- 
more in twelve days, carrying over 11,000 tons of ore 
on each trip, and is another example of this tendency. 
In this particular case it is simply an application to 
ocean shipping of a practice well established on the Great 
Lakes, though here a return cargo of coal is usually 
taken in the opposite direction of the ore stream. Also 
in the lumber trade a special type of vessel has been 
developed, — the sea sdiooner. ' 

Refrigerator ships. — ^There remains for discussion an- 
other important group of specialty types, those built 
to carry perishables. The first trade in which they were 
employed was the meat-carrying business. We read that 
in 1880, the first shipment from Australia, consisting of 
400 carcasses of mutton, was landed in London. * Twenty 
years later the importation of sheep and lambs had in- 
creased to over 7 million carcasses; by 1910, the number 

* Johnson and Huebner, op. cit., p. 44. 

2 Kirkaldy, The British Shipping Industry, p. 114, 



TENDENCIES IN CARRIER DEVELOPMENT 175 

had increased to 13 million, to which must be added, 
over 4 million carcasses of beef. 

Charles Tellier, of Paris, is given credit for having 
built the first refrigerator ship, the "Frigorifique," which 
carried fresh meat at 32 degrees for three months.'^ 

A modern refrigerator ship is equipped with miles of 
cooling coils — one is described as having 73,000 linear 
feet, or over 13 miles of pipe,^ which are kept cool either 
by the older ammonia process or the more recent ethyl- 
chloride method. 

"The method adopted is to line the ship's side with wooden board- 
ing, leaving a space of about twelve inches width between the wood 
and the plating of the ship's side and deck. This space is filled 
up with either charcoal or silicate cotton, for the purpose of keeping 
the heat out and the cold in. Thus considerable cargo space is 
sacrificed, and if there be no meat available, and the vessel has 
to load other forms of cargo, there is a loss. Moreover, if wool 
be stored in an insulated hold, it is impossible to use screws for 
stowing purposes, for though- by screwing the wool the quantity 
carried is increased, there is a danger of damaging the insulation; 
hence again there is a loss. It would be unwise, too, to carry heavy 
dead-weight cargo, such as ore or rails, in an insulated hold, owing 
to the possibility of damaging the insulation." ^ 

The largest fleet of refrigerator ships is probably the 
Blue Star Line, recently acquired by the Union Cold 
Storage Company (the British Beef Trust) consisting 
of fifteen steamers with an aggregate capacity of over 
'120,000 deadweight tons.* Much meat is also carried by 
combination passenger-freight ships which have portions 
of the cargo space equipped with cooling installations. 

I Newland, Romance of Modern Commerce, p. 190. 

^Marine Review, Sept., 1919. 

s Kirkaldy, op. cit., p. 118. 

* Shipbuilding and Shipping Review, November 20, 1919. 



176 OCEAN SHIPPING 

Similar facilities are found on fruit steamers, such as 
the banana carriers of the United Fruit Company. This 
fruit requires a constant temperature of 53 degrees to 
preserve it on the trip from the tropics.^ Reference to 
this type of carrier will be made in a later chapter. 
' AdatQS, The Conquest of the Tropics, p. 124. 



REFERENCES 

FoERSTER, E. "Technik der Weltschiffahrt" in Nautische Bibliothek. 
Vol. 6 and 7. (Berlin, 1909). 

Hurley, E. N. The New Merchant Marine. Chaps. V., VI. and 
VIII. (1920). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
IV. (1919). 

KiRKALDY, A. W. British Shipping. Book I. Chaps. IX.-XIII. 
(1914). . 

Portland Cement Association, Chicago. Various publications deal- 
ing with the subject of concrete ships. 

Riegel, R. Merchant Vessels (1921). 

Smith, J. R. The Effect of the Great War upon Shipping. No. 9 of 
Preliminary Economic Studies of the War. Published by the 
Carnegie Endowment for International Peace. (1919). 

SuTPHEN, H. R. Structural Steel Standardised Cargo Vessels. 
Paper read before the 26th General meeting of Society of Naval 
Architects and Marine Engineers. Philadelphia (1918). 

United States. Department of Commerce. Standardisation in the 
Construction of Freight Ships. By E. P. Stratton. (1916), 
Senate Committee on Commerce. Hearings pursuant to S. Res. 
•170 on United States Shipping Board Emergency Fleet Corpora- 
tion. Part VIII. (1919), 



CHAPTER X 
THE BUNKERING PROBLEM 

The United States leads in use of oil as marine fuel. — 
The outstanding feature of the present phase in the 
evolution of ocean transportation is the increasing use 
of fuel oil. The rapid rise of the motor ship with its 
oil'burning Diesel engine was outlined in a previous 
chapter, but besides this, an increasing percentage of 
the world's steam 'tonnage is being put on an oil-burn- 
ing basis. New ships are constructed to burn oil, old 
ones are being converted into oil-burners. 

The United States, whose newly acquired merchant 
marine, Because of its youth, reflects this tendency more 
strongly than the commercial fleets of other nations, has 
been foremost in the movement. "Eighty per cent, of 
the sea-going ships flying the American flag are, or 
soon will be, oil-burners. Less than 10 per cent, of ships 
flying foreign flags are oil-burners."* That America 
should lead seems quite natural, for this country at 
present produces more than 60 per cent, of the world's 
oil. From this it appears that this country can afford 
the transition more easily than those less favored. 

Many have foreseen the growing importance of oil as 
a marine fuel, but few would have dared to predict so 
rapid a transition from coal to oil as has actually taken 
place. Less than twenty years ago a British Royal 
commission found that the dawn of the oil age existed 

1 Edward N. Hurley, The New Merchant Marine^ p. 194, 

177 



178 OCEAN SHIPPING 

only in the minds of dreamers gifted with too vivid an 
imagination. They could not foresee the war, however ; 
and it was the war emergency which accelerated a slow 
process so as to turn an evolution into a revolution. 

War causes transition from coal to oil. — Two main 
causes, originating in war conditions, were responsible 
for this remarkable change. In the first place the war 
caused an extraordinary labor shortage. The United 
States was called upon to build, almost overnight, a 
merchant marine numbering millions of tons. The dif- 
ficulty of finding shipbuilders was great; but the task 
of recruiting the sailors, stokers, engineers, etc., to man 
the fleet, seemed desperate. Consequently anything 
which limited the number of men required to run the 
ships was eager<ly adopted, and oil-burning ships are 
ideal crew-reducers. , 

American emancipation from British fuel control. — 

The second reason for the wholesale adoption of oil as a 
motive power by the United States was of a political 
nature. The Shipping Board, under date of November 
2, 1919, furnishes the explanation under the heading, 
"Shipping Board's Fuel Stations to Girdle the World." 

"American Steamships can soon make a circuit of the 
world without the need of taking fuel at other than 
American owned fuel stations. This applies to vessels 
steaming east from the Atlantic Coast or west from the 
Pacific seaboard. 

"The as yet unwritten history of this accomplishment 
dates from 'the time when war conditions developed an 
acute situation in the "world's coal supply. During the 
early stages of the war, Great Britain put into effect a 
system of bunker license as a necessary military meas- 



THE BUNKERING PROBLEM 179 

ure. The United States Shipping Board realized that 
after the war, conditions might develop a situation with 
regard to coal supplies which would dictate the neces- 
sity of a modified application of bunker license at Brit- 
ish stations. In that event we would have been at a 
serious disadvantage unless immediate steps were taken 
to assure unrestricted operation of our ships in the world's 
trade. To accomplish this it was necessary to have oil- 
burning steamships, instead of coal-burners, with a large 
steaming radius, and so far as practicable this to be 
fixed at a minimum of 10,000 miles. The British order 
of September 29th, 1919, justified these apprehensions. 
But at that time we were ready." 

British coal shortage. — Great Britain was no less af- 
fected by the labor shortage than was the United States, 
although in a different way. During the war army 
drafts had reduced the ranks of her coal miners ; after 
the war the re-alignment of political forces which gave 
labor a stronger voice, and the new spirit prevailing 
amiong the labor classes, resulted in such an increase of 
the cost of production, owing to high wages, and in such 
a decrease in the quantity of production, due to shorter 
hours, that British shipowners had to witness an alarm- 
ing s'hrinkage in the amount of coal available for export 
and bunker purposes. This situation is aggravated by 
high freight rates which reduce the salability of British 
coal in foreign markets in competition with local coal 
or oil. Sir Auckland Geddes states that the quantity of 
coal available for exports has dropped from about 75,- 
000,000 tons in 1913 to slightly over 30,000,000 tons in 
1919, and that about two-thirds of the export trade is 
lost. Such a situation naturally drives British shipown- 



180 OCEAN SHIPPING 

ers to turn to the one substitute for the threatened 
bunker coal supply oil. In the Spring of 1920, the amount 
of British coal available for exportation and bunkering 
purposes was again radically curtailed. Even the United 
States, the largest coal producer in the world in the face 
of a threatened coal shortage had to put an embargo on 
coal exports (July, 1920). 

Rapid growth of oil burning merchant fleet — ^When 
one considers that only eighteen years ago, in 1902, the 
Arab, the first ocean-going steamship using oil, crossed 
the Pacific ocean, it seems incredible that to-day not far 
from 2,000 steamers of about eight million tons are ply- 
ing the seven seas using that fuel. Indeed it can only be 
understood in the. ligiht of the foregoing explanations. 
Before the war less than 1 per cent, of the world's ocean 
going tonnage used oil as a fuel. To-day, more than 15 
per cent, of this tonnage is said to be equipped to burn 
oil. Of the 3,801,211 gross tons classed by Lloyds' during 
the twelve months ending June 30th, 1919, 1,193,659 
gross tons, or almost one-third, were constructed with 
equipment to burn oil. Since July 1st, 1919, the United 
States Shipping Board has been turning out oil-burning 
ships at the rate of about 500,000 deadweight tons a 
month. Thus, to-day almost exactly one half of the sea- 
going tonnage of the United States are oil-burners. By 
the end of 1919 the larger vessels were divided as follows 
— on the basis of fuel used : 



United States Shipping 


Oil-Burning 


Coal-Burning 


Board Vessels of 






over 10,000 tons 


22 


13 


9,000 to 10,000 


27 


12 


8,000 to 9,000 


82 


43 



THE BUNKERING PROBLEM 181 

Besides the construction of new ships with oil-burning 
equipment, a considerable portion of the old fleet is being 
converted to use the new fuel. If present plans material- 
ize virtually all of the former German liners, taken over 
by this country, will undergo the change. The Atlantic, 
Gulf and West Indies Steamship Company's ships are 
on the conversion schedule, so are those of the American 
Linie and the ships belonging to the Atlantic Transport 
Cbmpany. It is claimed that the American-Hawaiian 
Company had planned the change before the war, but 
that the ship shortage caused them to postpone this 
alteration.^ 

The "A. G. W. I." a conspicuous example. — ^The most 
' notable instance among those jusit mentioned is that of 
the Atlantic, Gulf, and West Indies Steamship Company, 
whose plans are remarkable in many respects. This 
steamship combine, which is a holding company con- 
trolling several important steamship lines engaged in 
the regions indicated by its name, in February, 1919, 
acquired from the Tepetate Oil Company of Mexico a 
controlling interest in certain oil properties in the south- 
ern district of the Tampico Field, which were to pro- 
duce, by January, 1920, 45,000 barrels a day. A large 
number of tankers were ordered, indicating that its oil 
land purchase served a double purpose, i.e., to supply 
freight as well as fuel. The details of the method of 
control are given in the follow'ing diagram: 

Great Britain a close second in ship use of oil. — But 
while America leads in this new movement, other coun- 
tries are not idle spectators. The report comes from 

»The Nautical Gazette under date of February 21, 1920, reports 
that this company has placed orders for two large motorships of 
11,000 deadweight tons each. 



182 



OCEAN SHIPPING 



CHART SHOWING ORGANIZATION OF 
AGWI OIL INTERESTS 



Atlantic Gulf West Indies 
Steamship Company 




Outside Interests 








1 






Atlantic Gulf Oil Corporation 
(of Virginia) 
$10,750,000 $9,250,000 






1 
















Agwi Oil 
Company- 




Agwi Pipe Line 
Company 




Agwi Refining 
Company 



England that the change from coal to oil is nothing 
short of revolutionary. One hears of Cunard liners, in- 
cluding the Mauretania and Aquitania, White Star liners 
such as the Olympic, as well as units of all the great 
British steamship combines, laid up in repair-yards to 
be furnished with interchangeable coal and oil-burning 
equipment, or else put on an exclusive oil basis. An- 
other significant item is the formation of the British- 
Mexican Petrol Company, Ltd., half of Whose shares 
are held by British shipowners, chiefly represented by 
Lord Pirrie, the head of Harland and Wolff, but also 
a director in a half-dozen shipping concerns, on the one 
hand, and of the E. L. Doheny interests (Pan-American 
Petrol and Transport Company, Mexican Petrol Com- 
pany, etc.), on the other hand'. The purpose of the Com- 
pany is to develop the claims of the Huasteca Petroleum 
Company in Mexico and to construct storage tanks at 
all the great seaports on the main trade routes of the 



THE BUNKERING PROBLEM 



183 



world. The negotiations have been going on since 1915, 
but were not clinched until four years later. 

Advantages of oil over coal. — The explanation for this 
almost panicky change from coal to oil is found in an 
analysis of the relative qualities of coal and oil when 
used as marine fuels. The following diagram^ shows the 
situation at a glancfc. 



Graphic comparisons between oil and coal 

1. Steamintf 2. Storage 3. Evaporadon 4. Heat Value 5. Freight 




Oil requires one- Oil saves one- Oil evaporates Oil has one-third Oil saves one- 
half -the time to. third of' stor- twice ajf much greater heating half of freight 



raise head of 

steam from cold 

water. 



age space. 



7. Boiler 
Capacity 



water i» same 
time. 



charges- 



8. Deteriora- 9. Combustion 10. Effioiencr 
cion end Ash 




Oil reduces la- Oil increases No loss with Oil makes per- Oil increases efJi- 
bor cost three- boiler capacity oil. fed combustion ciency 10%. 

quarters. more than one- possible. 



Courtesy of Tidewater Oil Company. 

The advantages are brought out strongly where oil 
supplants coal in marine propulsion. So many factors 
are affected: deadweight, cargo space, steaming radius, 
speed, efficiency, handling cost, and time for bunkering 

fuel. 

The basic facts from which one should proceed to 
Judge the respective merits of coal and oil as marine 

1 "Fuel Oil" Tide Water Oil Company. 



184 ~ OCEAN SHIPPING 

fuel may be summed up in this way: It takes about 
1.63 lbs. of coal to raise one horse-power per hour under 
a modern boiler where a reciprocating engine is used, 
while the same result is achieved by one pound of oil; 
in the case of turbines the relative quantities used are 
1.25 lbs. of coal and .70 lb. of oil. Thus it appears that 
in each instance approximately 40 per tent, of the weight 
is saved. Diesel engines need only J^ lb. of oil per 
horse-power hour, a saving of about 70 per cent, oi fuel , 
weight over the coal-using reciprocating engine. 

Oil saves space. — Next comes the matter of space. In 
the first place, a ton of oil takes five cubic feet less than 
a ton of coal, so that apart from the fact just pointed 
out that less weight is required in proportion, the smaller 
quantity uses less space than an equal quantity of coal. 
If we take the extreme case of a steamer like the Maure- 
tania, which uses 1,000 tons of coal a day, the saving 
for the five-day trip would be 5 X 5,000 or 25,000 cubic 
feet or 250 registered tons saved, if the oil were stored 
in bunkers, as is required with coal. But such is not 
the case. Almost all the large ocean vessels are pro- 
vided with double bottoms, mostly for safety's sake, 
but also to carry water ballast. By storing the oil in 
these double bottoms, which is the standard practice, 
almost the entire bunker space "becomes available for 
cargo or passenger carrying. 

The following authentic data, from a report to the 
Naval Advisory Board, may serve as an illustration: 

"A S,000-ton deadweight coal-burning ship, 2,000 rated horse- 
power, steaming at 12 knots per hour, will require approximately 37 
days time and 1,060 tons of coal to make a round trip between New 
York and French channel ports. This shows that 21 per cent, of the 
ship's deadweight capacity would be required by her fuel. 



THE BUNKERING PROBLEM 185 

"The same ship burning oil could make the trip in 34 days,' ah;d 
requiring only 584 tons of oil, or less than 12 per cent, of the ship.;^ 
deadweight capacity, for fuel. Thus an oil-burning ship's cargo 
capacity is increased by 9 per cent, or 468 tons per voyage. 

"By storing the oil in double bottoms^ which is standard practic^, 
a S,000-ton deadweight capacity ship can carfy 689 tons, or 27: per 
cent, more cargo per trip than a coal burning ship of equal dead- 
weight." 

Oil reduces crew requirements. — Additional space is 
gained by the reduction of crew quarter 3, for from two'i- 
thirds to three-fourths of the firemen and trimmers are 
released by the substitution of oil for coal. It was esti- 
mated that had the Lusitania been changed to an oil- 
burner her fireroom force would have been reduced 90 
per cent., a reduction from about 300 men to 30. Two 
hundred and seventy men need considerable space to 
sleep, eat, bathe, etc. What was planned for the Lusi- 
tania is now being executed for the Mauretania. 

The labor question Is furthermore eased by the im- 
proved stokehold conditions. Intense heat, the gruelling 
labor of feeding and raking fires, the ash-covered deck 
and dust-laden air are unavoidable concomitants of the 
coal fire, but vanish when oil is used instead. .All this 
will improve the morale of the crew in as far as it will 
attract a higher type of engineer and will eliminate 
some of the less desirable elements from the roster al- 
together. 

The question of crews is a vital one in these days of 
strikes and constant demands for higher wages. This 
factor is said to have been instrumental in prompting so 
many companies to make the change. 

Oil gives better speed results. — The speed is affected 
in two ways. Coal-burning vessels lose a,, great deal, of 



186 OCEAN SHIPPING 

their engine efficiency through the necessity of cleaning 
a goodly proportion of the furnace. A ship of the 
Mauretania type is supposed to lose about 10,000 out 
oi her 68,000 horse-power every watch, through the clean- 
ing of thirty-two of her one hundred and ninety-two fires. 
Incidentally, it may be mentioned that the machinery 
and power required for handling ashes is also saved. 

Oil-burning vessels make from 10 to 20 per cent, more 
mileage than coal-burners, because of the better control 
of steaming. Fires can be started or stopped instantly, 
steam raised quickly, and fuel taken in more rapidly. 
President Teagle ^ of the Standard Oil Company of New 
Jersey tells of destroyers taking on fuel at the rate of 
40,000 gallons an hour in mid-ocean. Sometimes bunk- 
ering is done while both the supply ship and the de- 
stroyer are traveling at six knots an hour. 

Oil extends cruising radius. — The saving in space and 
weight may either be utilized in greater carrying ca- 
pacity or else applied to increasing the radius of ship 
operation. Freight steamers could go almost half-way 
around the world if they chose to carry as much weight 
in oil as would fill the space which is usually allowed 
for coal. This has a twofold significance. Econom- 
ically, it opens up vast possibilities in planning new and 
profitable voyages and in disclosing new trade routes 
Which the handicap of coaling requirements had hidden 
before. Politically, it would mean the emancipation of 
American ships from the British control of the world's 
coaling stations, or at least it would mean a blow at 
British fuel monopoly. 

There are still other advantages. Oil is often cheaper 
than coal, ton for ton, in actual money value, although 

» See Nautical Gazette; December 27, 1919. 



THE BUNKERING PROBLEM 187 

the general tendency is for oil and coal prices to run 
parallel. 

Oil does not deteriorate in storage. The fire risk, due 
to spontaneous combustion, is eliminated. Oil does not 
shift in rough' weather. Greater cleanliness reduces the 
painter's bill. The furnace repair bill is also reduced. 
Where fuel oil is used, boilers can be forced above their 
normal performances, thus affording increased speed. 

A network of oil bunkering stations is spread around 
the globe. — In view of this powerful array of induce- 
ments which oil holds out to tempt the shipowner and 
operator, the rapidity of the change does not seem sur- 
prising, especially if the proper weight is attached to 
the shortage 'and resulting rising price of coal as well 
as to the labor shortage and unrest. Rather more sur- 
prising is the fact that the oil industry has been able to 
keep pace with the requirements (the total requirements 
for the United States merchant marine alone have been 
estimated at 31 million barrels for 1919 and 66 million ' 
barrels for 1920). To the coaling stations that dot the 
trade lanes of the globe the fuel oil stations now have 
to be added. 

What the United* States Shipping Board has done in 
this respect was summed up 'by the Director of Opera- 
tions, Captain Paul Foley,^ as follows: 

"The position as regards distribution is that in«antici- 
pation of the situation now confronting us, the Division 
of Operations -have either erected or -provided for the 
erection of stations at St. Thomas and Rio Janeiro; at 
St. Vincent, Bermuda, The Azores and Brest at Bizerta 

^ "The Bunkering Problem of the American Merchant Marine." 
Address delivered by Paul Foley, director of operations, United States 
Shipping Board, at the Marine Exposition, Grand Central Palace, 
New York, April 16, 1920. 



1S8 



OCEAN SHIPPING 



Oil Bunkeritjig Stations of tti© World, Includ 




Ciourtesy Marine Review, "~ =^ 

and Constantinople, at Colombo, Singapore, Manila and 
Shanghai, Durban, Sydney and Wellington, Honolulu 
and Panama. 

"Having regard to the steaming radius of all ships 
the stations enumerated are sufficient in number to fully 
protect American Shipping on the trade routes of the 
world." . 

In addition, private corporations, especially the Stand- 
V 



THE BUNKERING PROBLEM . 189 

ing Both Largfe and Small Centers of Supply 



^/V£> 




<ST£A/if3N/p Fuel O/l Stat/o/^s 

Of Tff£ (^ORLO 
© /ndicates Pr/napa/ tSraf/Ofhs 



ard Oil Company, have established numerous oil sta- 
tions under American control. The accompanying map 
shows the oil hunkering stations of the world according 
to latest information : 

The Royal Dutch-Shell Petroleum Combination. — 
Among the foreign companies who are supplying ships 
with fuel oil, British concerns are naturally most con- 
spicuous. We have previously mentioned the forma- 



190 OCEAN SHIPPING 

tion of the British-Mexican Petrol Company, through 
which British ship-owning companies are operating with 
E. L. Doheny, the American-Mexican oil king, in an 
endeavor to build oil stations along the trade routes of 
the world. But the biggest fiactor in the foreign world 
is the Royal Dutch Shell Transportation Company, a 
Dutch-English combine which, through the Bataafsche 
Petroleum Company, carries on production in the Dutch 
Indies, Rumania, Russia, Egypt, Sarawak, the United 
States (Oklahoma, California and Texas), Mexico, 
Venezuela, and other countries. In Russia, this company 
joined forces with the de Rothschild (Paris) group, and in 
Mexico, according to recent reports, bought out Lord 
Cowdray's interest in the Mexican oil-field, which was 
represented by the "Compania de Petroleo El Aguila" 
(Mexican Eagle Oil Company). The latter possesses 
many properties, extensions, transport and refining fa- 
cilities in Mexico and also a selling organization (the 
Anglo-Mexican Petroleum Company, Ltd.) with a fleet 
of tank-steamers controlled by the Eagle Oil Company. 
One of the most* important fuel stations of the Royal 
Dutch Shell group is the Dutch Island of Curacao, in 
the Carribean, not far from the coast of Venezuela and 
favorably situated in respect to the Panama Canal. It 
is called the "Hongkong of the Carribeato." Here one 
of the largest refineries in the world has been erected, 
drawing its raw material from the Maracaibo field in 
Venezuela. Ocean ships may literally look in at its front 
door, and recently the price of oil was said to be seventy- 
five cents a barrel cheaper than at Panama, and forty 
cents a barrel cheaper than in the United States. The 
Shell Group also acts as the selling organization of the 
Anglo-Persian Oil Company, controlled by the Burraah 



THE BUNKERING PROBLEM 191 

Oil Company, a controlling share of whose working 
stock is said to be held by the British Government.^ 

The world's tank fleet. — But the bunkering stations 
have to be supplied with fuel oil, which calls for a fleet 
of tankers — tank steamers, tank barges, etc. The de- 
mand for liquid marine fuel grew too rapidly for the build- 
ers of tank ships. Consequently, during the war, many 
ships carried oil as freight in their double bottoms. The 
present tank tonnage of the world amounts to over three 
and a half million tons. Its growth is rapid. The 
program of the Shipping Board alone, according to the 
Third Annual Report, embraces 139 tankers of 1,316,630 
deadweight tons. To these must be added a long fleet, 
delivered and building, for private account. The num- 
ber will be the larger as the Shipping Board has decided 
not to sell any of its tankers, because it needs them all 
to supply its own fleet. When the year 1921 opened there 
were under construction throughout the world. 169 tank 
steamers of an aggregate gross tonnage of 1,169;003 of 
which 88 of 637,100 tons were building in the United States. 

The essentials of v^orld petroleum production. — But to 
fill these storage tanks, scattered throughout the world, 
with fuel oil, and to provide the fleet of tankers with 
their cargo, ever increasing production is necessary. 
This brings us to the crux of the matter; the most es- 
sential factor in the whole question, namely, that of the 
certainty or uncertainty of future supply. It is this 
problem which puts the one "but" into an otherwise 
satisfactory situation. 

The facts summed up are these : for sixty years — 
except from 1898 to 1901, when Russia reached the peak 

1 The data concerning the various oil companies were compiled from 
current numbers of shipping and oil magazines. 



192 



OCEAN SHIPPING 



of her vast petroleum production — the United States has 
led the rest of the world with its steadily increasing 
flow of oil. During this period the United States has 
supplied 61 per cent, of the world's oil. But so fast has 
the consumption risen that even this country has begun 
to import oil, particularly from Mexico. The following 
chart illustrates our statements: 

CHART SHOWING PETROLEUM USED IN THE UNITED 

STATES AND THE REST OF THE WORLD 

FROM 1880 TO 19171 







Ml* iv^ rti*. 1 


•U«Cl« 














2 




















1 


















( 


f 
















jf . - 


















z i- 














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z = 


= 














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= 
















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.y'=- 


= 


- 












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= 












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s^iii 



Cata from U. S. Geological Survey. 

Lines extended by the author from 1917 to 1919 on basis of latest 
available data 

Mr. Paul Foley, in the above-mentioned address, summed 
up the situation as follows : 

"The essential facts as regards production are first, that whereas 

65 per cent of the current petroleum production of the world is being 

'C. G. Gilbert and Joseph E. Payne, "The Energy Resources of the United 
States: A Field for Reconstruction," Smithsonian Institution Bulletin, 102, 
Vol. I, 1919. 



THE BUNKERING PROBLEM 193 

drawn from the United States, practically all of the visible future pro- 
duction of the world is under the control of Great Britain ; second, 
that whereas the production in the United States is available to all 
other nations on equal terms with our own, that under the control 
of Great Britain and located in the middle area of the world is 
available only to British nationals. American citizens were excluded 
from the Burmah producing fields in the year 1884 pursuant to an 
order signed by Queen Victoria and the principle then established 
has been consistently followed as new fields have been developed. 

"The practical effect of these restrictions is that while British ships 
can bunker in the ports of the United States and the Carribbean on 
equal terms with American ships, and British requirements overseas 
obtained from the nearest producing center, American requirements 
overseas can only be obtained at British terms and all must reflect 
the long haul from the American and Mexican seaboards. 

"Unless corrected the consequences of the handicap must sooner 
or later prove fatal." 

Phenomenal increase in demand for oil. — "What causes 
the tremendous demantd for* oil? To giye just one 
example: with more than six million pleasure automo- 
biles operating in the United States alone, we have an 
annual consumption estimated by the officials of the 
foremost company manufacturing high-grade lubricants 
at one hundred and twenty million gallons of lubricat- 
ing oil, whereas twenty years ago the demand for this 
purpose was practically nothing. Add to this thirty- 
seven and one-half million gallons of lubricating oil used 
by motor trucks, which requirement may double in the 
next few years. Tractors consume another thirty-five 
million gallons, giving a total of fully two hundred mil- 
lion gallons of lubricating oil alone.* This is merely 
one phase of the question. The Sinclair Oil Company 
estimates that "more than 860,000,000 barrels of fuel 
oil could be absorbed annually by the potentially avail- 

1 The National Geographic Magazine, February, 1920. 



194 OCEAN SHIPPING 

able fuel oil market. This would call for a crude oil 
production of about 1,700,000,000 barrels annually, or 
more than three times the world's present supply. Fur- 
thermore, it is said that if a third of the world's ocean 
tonnage were to-day burning oil instead of coal as a 
fuel there would be consumed not less than 160,000,000 
barrels of fuel oil annually. How stupendous this figure 
is can be realized by the fact that the amount named is 
about two and a half times the crude oil production of 
Mexico. In rough terms it is estimated that 1,000,000 
gross tons of ships consume more than 10,000,000 bar- 
rels of fuel oil in a year." 

Shipping adds greatly to this demand. — Thus the new 
demand of our shipping program alone is estimated by 
George Otis Smith, Director of the United States Geo- 
logical Survey,^ to involve fuel oil • in quantities equiva- 
lent to nearjy one-half of the present domestic output; 
and unless there is a corresponding decrease in other 
demands, this new requirement must be met with an 
increase of nearly 200,000,000 barrels in production. It 
is of special interest to see what Mr. E. N. Hurley, late 
Chairman of the U. S. Shipping Board, says on this sub- 
ject, since he was largely responsible for putting so 
many of our ships on an oil basis : 

"If the world should turn during the next ten years 
from coal to fuel oil, and from steam to the motor ship, 
the question of petroleum supplies will become im- 
portant. 

"At present the largest marine consumption of pe- 
troleum in the world is probably that of the United 
States Navy, estimated at 5,000,000 barrels. yearly under 
war conditions. This quantity would not go far in op- 

1 Annalist, February 23, 1920. 



THE BUNKERING PROBLEM 19S 

crating an American merchant marine of 25,000,000 tons. 
Data upon which to figure consumption for such a fleet, 
with types of passenger and cargo ships running at vari- 
ous speeds and in various classes of service, are not 
yet very ample. But engineers have adopted a rough- 
and-ready ratio, estimating one ton of oil yearly to a 
ton of dead-weight shipping, where the fuel burned is 
for steam, and half a ton yearly for motor ships. 

"On this basis the American merchant marine alone 
would require 150,000,000 barrels yearly for steam, or 
75,000,000 barrels for motor ships. The world's ocean 
tonnage was 50,000,000 tons before the war, and under 
the improvement and cheapening in transportation, 
made possible through petroleum, might increase to 75,- 
000,000 tons within the next five or ten years, this esti- 
mate including our own merchant marine. 

"Thus, for 75,000,000 tons of motor ships there would 
be required yearly somewhere between 200,000,000 and 
250,000,000 barrels of crude oil. This is approximately 
half of the world's total present production, and more 
than 80 per cent of our own production." ^ One would 
have to reckon with a considerably larger amount if 
Dieseled tonnage is partly substituted for steam tonnage. 

Industries put on oil basis. — But ships are not the 
only new claimants to the world's oil. We now read 
that whole industries are to be put on an oil basis. 
France is prominent in this respect, as appears from 
the following: "The problem of substituting fuel oil 
for coal is one of the most important which confronts 
French industry. In many cases, the substitution has 
been the result of the insistence of the Minister of In- 

1 See Hurley. "When Coal Oil Johnny goes to Sea." 



196 OCEAN SHIPPING 

dustrial Reconstruction. To-day it is about to be car- 
ried out on a vast scale. The Commissioner General of 
Fuel Oils and Combustibles has established a program 
for the progressive transformation of furnaces and ma- 
chinery from coal to oil-consuming. This program is 
already being carried out. 

"Recent experiments made with railway locomiotives 
prove that they can burn petrol with excellent results. 
The Paris-Lyons-Mediterranean Railway has made op- 
erative a program which calls for the monthly use of 
1,500 cubic meters of mazout, starting with the first 
of the year. This quantity is to be increased pro- 
gressively until it attains 5,500 tons per month by the' 
end of the year. In 1921, consumption will 'be 15,000 
cubic meters per month. 

"The Minister of Public Works and the Commissioner 
General of Petrol have examined closely the proposal 
to construct a pipe line from Havre to Paris to furnish 
mazout to the lat.ter city. American engineers, special- 
ists in pipe-line construction and petrol transportation, 
have been called in consultation." 

Similar reports come from Italy and other countries * 
of meagre or no coal resources. So the future demand 
for oil is bound to grow rapidly. What about the supply? 

The world's petroleum reserve. — Our estimated unre- 
covered underground reserve of about six and one-half 
billion barrels, as now available, is far less impressive 
when we realize how fast we are using it up, and that 
while we have burned and wasted less than 1 per cent, 
of the coal resources of the United States in the last 

1 Guaranty Trust Company of New York. "American Goods and 
Foreign Markets" (Weekly Letter) February 16, 1920. 



THE BUNKERING PROBLEM 



197 




198 OCEAN SHIPPING 

one hundred years, we have apparently used up 40 per 
cent, of our available oil supply in only sixty years. 

A glance at the map shows that outside of the United 
States the great oil supplies of the earth, so far as now 
known, are mainly centralized in the Near "East, in 
South America and in Mexico. 

In general the regions first developed and drawn upon 
most heavily are, of course, likely to be soonest ex- 
hausted. Therefore, it is practically certain that as the 
oil resources of the United States and Rumania diminish 
and the wells of Mexico also yield under the pressure 
of rapidly increasing exploitation, the world will have 
to look for its oil supplies to regions where inaccessi- 
bility and lack of demand have so far retarded devel- 
opment. It is possible that eventually considerable sup- 
plies may be discovered in the Near East, and that tem- 
porary relief will be granted to a limited extent by, the 
Oil Leasing Bill which Congress has just passed. It 
also is possible, perhaps even probable, that more ecor- 
nomical methods of production will relieve the present 
strain. 

Possible substitutes for petroleum. — Optimists look to 
the oil shale of Colorado, Wyoming, etc., to save the 
situation in the future. But as Mr. M. L. Requa, Vice- 
President of the Sinclair Oil Company, so clearly pointed 
out, to work the shale land on an adequate scale would 
require an army of workmen which would rival the hosts 
of a coal mine. 

Then a^ain the chemists promise that oil will be ob- 
tained from coal. But that, too, will require huge addi- 
tional working forces, increased coal output, etc., not 
to mention the question of cost. , 



THE BUNKERING PROBLEM 199 

America's future as a maritime nation requires our 
participation in world oil exploitation. — The only safety 
for the future oil supply as far as this country is con- 
cerned, lies in a vigorous participation of American capi- 
tal backed by a far-sighted and unprejudiced govern- 
ment in the exploitation of foreign fields. The experi- 
ence of Mr. Doheny having to turn to London after 
his own country refused co-operation, must not be re- 
peated. The seriousness of the situation was brouglit 
out in a letter written to Dr. Garfield by Mr. M. L. 
Requa. The letter ^ follows : 

February 28, 1919. 
Dr. H. A. Garfield, 

United States Fuel Administrator, Washington, D. C. 

Dear Sir: Following a conference in which the petroleum problem 
was considered in detail, we have agreed upon the following state- 
ment of fact as representing an accurate picture of the petroleum 
problem as we see it : 

1. The rapidly growing use of internal combustion engines, as well 
as of fuel oil on ships, both naval and merchant, inevitably means a 
more rapid increase in the consumption of petroleum in the future 
than in the past. 

2. The enormous increase in world consumption in recent years 
has been coincident with the increasing difficulty of production in the 
United States, due to much greater depth necessary to drill in order 
to reach the oil-bearing horizon. 

3. Careful calculations based upon data of the United States Geo- 
graphical Survey indicate the probability that 40 per cent, of the 
available oil of the United States has already been exhausted, whereas 
less than 1 per cent of the coal has been mined. 

4. The United States produces, consumes, and exports nearly 70 
pe;r cent, of the annual world production of petroleum, and has 
therefore industrially and commercially more at stake than any other 
nation. 

5. The success of the United States Shipping Board program is 
dependent in largest part upon the use of fuel oil. 

1 Congressional Record, July 29, 1919, p. 3519. 



200 OCEAN SHIPPING 

6. In view of the enormous expansion in consumption in th6 recent 
past and immediate future, it is absolutely necessary, in order that 
the situation may be thoroughly safeguarded, that American interests 
be encouraged by sympathetic Government cooperation in acquiring 
additional foreign sources of supply and by protection of properties 
already acquired. 

7. American oil companies are seriously handicapped in their 
ability to compete throughout the world with the Shell-Royal Dutch 
combine, and if the combination now under discussion in England 
becomes an accomplished fact, American interests will be still further 
handicapped. 

8. The review of domestic conditions as set forth in the pamphlet 
entitled "Petroleum Resources of the United States," written by 
M. L. Requa, in 1916, has been proved to be a conservative state- 
ment of conditions. The arguments made at that time are even 
more acutely applicable at present. 

9. The memorandum entitled "The World's Problem of Petro- 
leum," prepared by Mr. Requa in September, 1918, is, we believe, a 
conservative presentation of the international situation, and the plan 
suggested therein is the only practical solution. 

10. We are not unmindful of the oil shale resources of the 
United States. The cost, however, of producing oil from this source 
is so much greater than the cost of producing petroleum from oil 
wells that it can not become a commercial proposition until prices 
are much above those now prevailing. 

11. We can not too strongly urge some immediate Government 
action that will guarantee the continuance in American ownership of 
American oil companies, and by proper legislation make foreign con- 
trol of these companies impossible. 

12. We urge that Government cooperation with existing com- 
panies be agreed upon, which will guarantee the requirements of the 
Navy and the Shipping Board at satisfactory prices wherever delivery 
is made throughout the world. 

13. American geologists petroleum engineers, and drillers have 
led the way in developing the majority of the oil fields of the world, 
but these men have in large degree been in the employment of foreign 
capital. American capital should be encouraged to use this technical 
skill now forced to seek employment under foreign flags and to serve 
foreign interests. 



THE BUNKERING PROBLEM 201 

14. The passage of the oil-leasing bill has been taken into con- 
sideration, and we desire to point out that all estimates made have 
included all withdrawn lands. Failure to drill these lands will render 
the situation more acute than above outlined. 

We are impressed with the seriousness of the efforts being made 
by the British and Dutch interests to dominate the petroleum supply 
of the world. The United States now commands the premier posi- 
tion by reason of its domestic production, which even now exceeds 
one-third billion barrels per year, with less than 7,000,000,000 barrels 
estimated reserves (20 years life). This position of our country can 
and should be safjguarded and rendered secure by the Government 
giving morpl support to every proper effort of American capital to 
make its circle of activity in oil production coextensive with the new 
expansion of American shipping. This means a world-wide ex- 
ploration, development, and producing petroleum company, financed 
*ith American capital, guided by American engineering, and supel"- 
vi'sed in its international relations by the United States Government. 
In its foreign expansion American business needs this governmental 
partnership, and through it the interests of the public can best be 
safeguarded. ' 

M. L. Requa, 
General, Director Oil Division, 
United States Fuel Administration. 
Van. H. Manning, 
Director Bureau of Mines. 
George Otis Smith, 
Director United States Geological Survey. 

From the foregoing it appears that a proper Solution 
of 'the oil question is a vital one, for the future economic 
peace of the world, and for a sound development of 
world shipping in particular. The crisis has riot yet 
been reached. As President Teagle, of the Standard Oil 
Company of New Jersey, sard: 

"As for fears lest the production of crude petroleum 
may not keep pace with these demands for oil fuel for 
marine use, it should be borne in mind that Mexico, with 
potential production estimated at 450,000,000 barrels of 



202 OCEAN SHIPPING 

crude oil a year, has been shipping but 75,000,000 barf els, 
or less than 17 per cent, of her possible supply." Not 
everybody will view with absolute equanimity a devel- 
opment which makes this country dependent upon an- 
other nation's natural wealth. For, a refusal on the 
part of that nation to permit unlimited exportation or 
unrestricted exploitation by foreign interests may result 
in unpleasant complications. 

Undoubtedly, the transition from coal to oil In marine 
propulsion has been too rapid. Reconversion to a coal- 
burning basis has happened and Lord Pirrie, head of Har- 
lan and Wolff, Belfast, after a recent tour of inspection 
through the Mexican oil-fields, expressed serious concern 
for the future of oil-burning ships. On November 10, 
1920, he spoke as follows : 

"I have held strong views for the last 10 or 15 years 
that it is a wrong principle to burn oil merely as fuel. At 
the same time, the Dieeel engine will require great care in 
manufacture as well as developing slowly. Personally I 
feel so concerned after having recommended so many of my 
shipowning friends to convert for oil-fuel consumption, 
which undoubtedly is a most extravagant way of using 
such a valuable commodity, and I fear that only such vessels 
as the Olympic, Aquitania and a few other similar express 
passenger liners will be secure for future oil supplies, and 
am therefore advising friends to stop converting ordinary 
cargo vessels. 

"Until Mexico gets Into a more settled state my feeling 
Is that there is great insecurity in going in for too large a 
program of vessels built for oil-fuel consumption, more 
particularly as at present we are relying, to a large extent 
on the production of the Mexican oil-fields. 



THE BUNKERING PROBLEM 203 

The oil question, even more than the coal question, 
is what the great English economist, W. S. Jevons, 
in his remarkable treatise, "The Coal Question," de- 
scribes as one "of almost religious importance which 
needs the separate study and determination of every in- 
telligent person." Our attitude towards its proper solu- 
tion will largely depend on our entire philosophic out- 
look upon life. 

REFERENCES 

Annin, R. E. Ocean Shipping. Chap. XI (1920). 

Bankers' Trust Company. America's Merchant Marine. Chap. 
XIII. (1920). 

Bedford, A. C. Fuel Oil and Foreign Trade. Address delivered be- 
fore Seventh National Foreign Trade Convention. (1920). 

Foley, P. The Bunkering Problem of the American Merchant 
Marine. Address delivered before National Marine League of 
America. (1920). 

Gilbert, C. G., and Payne, J. E. The Energy Resources of the 
United States; a field for reconstruction. Smithsonian Institu- 
tion, Bulletin No. 102, Vol. I, (1919). 

Hurley, E. N. Why our ships mil now stay on the ocean. (1918). 

When Coal-oil Johnny goes to sea. (1918). 

The New Merchant Marine. Chaps. XIV. and XV.. (1920). 
Journal of the American Society of Mechanical Engineers. Vol. 

40, No. 7: A Symposium on The Economical Use of Fuel 

(1918). 
Little, A. D., Inc. The Petroleum Outlook (1921). 
Smith, G. O. Where the World Gets its Oil, in National Geographical 

Magazine, Feb., 1920. 
Smith, P. S. A. The Shell that hit Germany hardest. (London,, 1918). 
Standard Oil Company of New Jersey. Fuel Oil Installations. 

(1919). 
Tide Water On. Company. Fuel Oil. (1919). 
United States Federal Trade Commission. Co-operation in 

American Export Trade. Vol. I. (1916). 



204 OCEAN SHIPPING 

Secretaries of War, Navy, Interior and Commerce and Shipping 

Board. Letters addressed to Chairman, Senate Committee on 

Commerce relative to The Fuel Supply in the United States. 

(1919). 

Shipping Board. Fuel Stations of the World. (1919). 

Shipping Board's Fuel Stations to Girdle the Globe (1919). 
Department of the Interior, United States Geological Survey, 
World Atlas of Commercial Geology, Part I (1921). 



PART IV 
THE CARGO 



205 



CHAPTER XI 
CARGO AND CARRYING CAPACITY 

Weight of world's seaborne trade. — No organism can 
be understood unless its functions are understood. The 
function of world shipping is . to carry the seaborne 
trade of all countries. Therefore, a discussion of the 
cargo, its nature and volume is imperative.^ 

The first question to be answered is: What is the 
total volume or the aggregate tonnage of the commodi-; 
ties shipped from one country to another? In other 
words, what is the total weight of the world's seaborne 
trade? One does not have to be a statistician to realize 
the difficulties which render an accurate answer to this 
important question well nigh impossible. It is fortu- 
nate, therefore, that so eminent an authority as the "De- 
partmental Committee appointed by the British Board 
of Trade to consider the position of the Shipping and 
Shipbuilding Industries After the War,'' whose chair- 
man was Alfred Booth, the directing genius of the Cunard 
Line, has ventured an estimate based upon all data 
available. According to this authority, the total weight 
carried by seagoing vessels plying between the different 
countries of the world, averages 250 to 300 million 
tons a year. This approximation refers to the days when 
the war had not yet disarranged the mechanism of in- 
ternational trade. , 

1 We shall reserve the discussion of passenger trafSc for a later 
chapter and confine ourselves here to an analysis of the freight 
business. 

207 



208 OCEAN SHIPPING 

Comparison with other weight statistics. — Such a figure 
means little to the average person and gains significance 
only by comparison with similar figures. We shall com- 
pare it first with the total weights of the commodities 
produced in the United States. The Shipping Board, 
through its statistical division, has compiled tables giv- 
ing the weight of the most important agricultural and 
mineral products of the United States for the year 1917. 
These figures show a total of a little less than a billion 
and a half tons. Careful production figures have been com- 
piled by leading economists such as Day, Stewart, Kemmer 
and King. Mr. Herbert Hoover, Secretary of Commerce, in 
an article which appeared in the Saturday Evening Post of 
April 10, 1920 gives the following table which covers the 
great bulk of our products, namely, agricultural products, 
metals, coal, salt, cement, lumber and the products of 
quarries. 

Production in Tons 

1913 1,081,293,417 

1914 1,019,018,207 

1915 1,073,472,988 

1916 1,162,489,S30 

1917 .' 1,241,173,806 

1918 1,247,787,883 

1919 1,117,181,233 

Similar results are shown by transportation returns. 
Recent railways statistics tell us that, after eliminating all 
duplications, the total weight of freight carried by the 
railroads of the United States is, approximately, 1,100 
million tons. While it is true that this country produces 
more than half of the world's total output of many basic 
products, nevertheless, all things considered, the world's 
total production of the principal agricultural and mineral 



CARGO AND CARRYING CAPACITY 209 

commodities is probably a multiple of the figures given 
for the United States. We see, therefore, that in spite 
of the unprecedented development of ocean navigation 
which has marked the last one hundred years, and in 
spite of the fact that many necessities of life are to-day 
moved by water from their place of origin to distant 
lands, only a relatively small percentage of the world's 
total production enters into seaborne trade. Neverthe- 
less, the seaborne trade of to-day is enormous. 

Weight of seaborne trade by countries. — Among the 
commercial nations, the United Kingdom supplies the most 
satisfactory statistics of seaborne exports and imports. One 
reason is the fact that in this case total trade and seaborne 
trade are identical. British foreign trade during selected 
years showed the following weight totals : 

WEIGHT OF FOREIGN TRADE OF THE UNITED KINGDOM 
IN MILLION NET TONS 
Calendar 
Year Exports Imports 

1913 87.7 S9.3 

1917 4S.4 35.8 

1919 46.2 41.5 

After careful consideration of all data available to us, we 
believe the following to represent fairly closely the weight 
balance of our own seaborne foreign trade : 

WEIGHT OF SEABORNE FOREIGN TRADE OF THE 
UNITED StATES IN MILLION GROSS TONS 
Fiscal 
Year Exports Imports 

1914 30.9 21.1 

1918 34.4 20.6 ' 

1920 38.6 34.2 



210 



OCEAN SHIPPING 



For further purposes of comparison we give in the 
following ta'ble the amount of freight moved in Ameri- 
can-owned ships in both coastwise and overseas service :^ 



FREIGHT SHIPPED BY COMMODITIES AND 
BY DIVISIONS 



COMMODITY. 



Total. 



Atlantic 

Coast 

and Gulf 

of Mexico. 



Pacific 

Coast 

(including 

Alaska). 



Great 



and St. 

Lawrence 

River. 



River and 
Its Tribu- 
taries. 



All other 
Inland 
Waters. 



Total tons 

Canned Goods tons 

Cement, brick and lime. tons 

Coal tons 

Cotton tons 

Flour tons 

Fruitsand Vegetables, .tons 

Grain tons 

Ice tons 

Iron ore tons 

Lumber tons 

Mfeet 

Naval stores tons 

Petroleum and otheroilstons 

bbls. 

Phosphate and fertilizer tons 

Fig iron and steel rails. . tons 

Stone, sand, etc tons 

Tobacco tons 

Miscellaneous merchandise, 
tons 



'268,002,611 



80,259,375 



21.853,985 



125,384,042 



27,962,583 



2,542,626 



951,790 

2,951,828 

68,548,576 

927,039 

1,718,462 

2,343,508 

8,076,313 

1,032,966 

73,457,237 

11,606,735 

6,533,244 

453,460 

18,619,925 

109,147,709 

1,385,356 

1,326,986 

18,478,563 

227,403 

45,896,466 



635,372 

2,350,779 

23,248,105 

741,400 

232,127 

1,613,586 

862,378 

941,648 

344,968 

5,880,916 

2,988,023 

416,360 

10,368,849 

58,970,191 

1,279,937 

718,734 

6,718,929 

140,226 

23,875,061 



326,007 

208,358 

270,649 

4,990 

298,629 

481,600 

546,042 

878 

10,228 

3,184,786 

1,996,750 

16,264 

7,699,115 

46,656,072 

33,680 

142,776 

1,638,685 

8,188 

6,983,111 



14,961 

199,913 

30,179,847 

46 

1,085,290 

117,906 

5,969,521 

6,895 

72,614,761 

1,629,756 

1,091,898 

6 

314,959 

1,962,160 



184,188 

7,506,452 

3,584 

6,556,967 



72,820 

175,724 

13,916,013 

180,563 

99,513 
119,297 
617,946 

14,302 
470,409 
744,873 
344,203 

18,515 

245,930 

1,553,878 

68,458 

256,616 

1,710,857 

75,393 

9,176,355 



2,640 

17,054 

933,961 

40 

2,903 

11,119 

80,426 

70,243 

16,871 

166,406 

112,199 

2,316 

1,072 

5,418 

3,281 

25,673 

903,640 

12 

403,971 



> AH tons of 2,000 pounds. 

> Does not include 80,048 tons of freight carried on fishing vessels. 

Tonnage required to haul seaborne trade. — The next 
question refers to the number of ships which are re- 
quired to move these 250 or 300 million tons across the 
seven seas. The answer to this quesition depends in the 
first place upon the ship's space required to carry a unit 
— say a ton — ^of a given commodity, secondly, upon the 
length of the haul, that is, the distance between the 
points of origin of shipments and the points of destina- 

* Transportation by Water— 19\6, Bureau of the Census, Wash- 
ington, 1920. 



CARGO AND CARRYING CAPACITY 211 

tion and, finally, upon the speed of the ships. The last 
two factors in the main determine the number of turn- 
arounds which a ship can accomplish within the course 
of a year, although this item is also affected, and at times 
like the present, even vitally so by the length of the 
average stay in port. Of course, there are many other 
influences which come into play and make a mathemati- 
cal solution of this problem impossible. We mention only 
the most important: ships are frequently not loaded to 
capacity; they often perform part of their voyage al- 
together in ballast; and passenger trade interferes in 
varying degrees with the full utilization of the available 
space. 

Apart from these modifications the main facts of the 
situation are these ; before the war, the merchant marines 
of the world aggregated, approximately, 50 million tons 
gross or approximately, 35 million tons net. These ships 
in the course of the fiscal year 1911-1912, — the only year 
for which such an estimate has been compiled, — made 
a sufficient number of voyages to bring the sum total 
of entrances of vessels, with cargoes and in ballast, at 
the ports of all countries, to 570 million tons net. Un- 
fortunately, the fact that many steamers call at inter- 
vening ports makes the reliable calculation of the average 
number of turn-arounds, or the average haul, impossible. 

Elements of ship measurement. — More definite informa- 
tion is available regarding the other factor, — namely, the 
respective tonnage requirements of different commodi- 
ties. Before this subject is approached, it is important 
that the terminology used in determining ship capacity and 
cargo measurement be understood, and for that purpose 
we will begin with an explanation of the meaning of the 
term "ton" as a weight and measurement unit. 



212 OCEAN SHIPPING 

Early tonnage calculations. — An interesting account of 
the early history of tonnage calculations appeared in a 
recent issue of the Nautical Gazette. 

"Writing in the March number of United States Naval Institute 
Proceedings, Lieutenant Commander Carl H. Hermance says that 
the term tonnage appears to have originated from the tun, cask of 
wine, the earliest system of measuring vessels being simply to count 
the number of casks or tuns of wine which could be carried and 
thus obtaining a measure of the internal capacity. In the reign of 
Henry V, A. D. 1422, the first act dealing with the measurement of 
vessels of which any record can be found, required "Keels that 
carry coals at New-castle to be measured and marked." 

"The 'keels' were marked by nails upon the bulkheads at each end 
of the cargo space, or by driving nails into the stem and stern-post 
to indicate the corresponding load draft. In the year 1694 another 
a<;t of the British Parliament was passed for the measurement of 
keels, and a weight was then fixed upon as a standard instead of 
a measure. This act required 'keels' to be measured by putting 
into them deadweights of iron or lead, allowing S3 hundredweights 
to every chaldron of coals, and a maximum load of 10 chaldrons 
or 26J^ tons. The load-line was then marked on the stem, stern and 
each side amidships. 

"The measurement of ships, as distinct from the rough estimates 
of tonnage which are found in early records, appears to date from 
the first part of the 17th century. 

"In 1720 a rule for the measurement of vessels, which was ulti- 
mately known as builders' tonnage, was first legalized in an act in- 
tended to prevent smuggling, by prohibiting small vessels of 30 tons 
burden and under from carrying spirits. 

"In 1773 a general rule, which came to be known as the builders' 
old measurement rule, for the measurement of all merchant vessels 
was made by Act 13 George III, and this, with some slight modifi- 
cations, continued in force until 1835, and had a most evil effect upon 
naval architecture. 

"As the register tonnage is that upon which a vessel has to pay . 
dock and other dues, while the deadweight carrying capacity repre- 



CARGO AND CARRYING CAPACITY 213 

sents the earning power of an ordinary cargo' vessel, it is obvious 
that from a shipowner's point of view the most profitable vessel is 
the one which can carry the greatest amount of cargo in relation 
to her register tonnage. 

"The method of estimating the official tonnage known as the 
builders' old measurement rule, in which the square of the breadth 
entered into the calculations, while the depth was neglected, fostered 
forms, so as to produce a larger carrying power with a comparatively 
small official tonnage. This resulted in the construction of unhandy 
box vessels, which were positively dangerous from their liability to 
capsize. 

"The modern tonnage laws aim at ascertaining accurately the 
internal capacity of a vessel, hence there is not now the same induce- 
ment to build such badly proportioned ships.'' 

To-day there are three ways of applying the word ton 
to a ship, diflf erentiated as : displacement ton, deadweight 
ton and registered ton, the last named being subdivided 
into: gross ton and net ton. 

Displacement tonnage. — The displacement tonnage in- 
dicates the weight of the vessel and is, therefore, ac- 
cording to a well known principle of physics, equal to 
the weight of the water it displaces. We distinguish 
between the vessel's displacement "light" and displace- 
ment "loaded". The former indicates only the weight 
of the vessel together with the weight of a normal crew 
and adequate supplies. The displacement "loaded" in- 
cludes the weight of the cargo and bunkers i. e., coal or 
fuel oil. The ratio of this capacity to the weight of the 
ship itself differs according to the hull construction. In 
order to show the carrying capacity at each successive 
foot or inch that, with increasing load, the ship is further 
submerged, a so-called 'displacement curve and scale 
is prepared. Displacement tons may number either 
2,240 or 2,204.62 pounds avoirdupois, according to wheth- 



214 OCEAN SHIPPING 

er the English or the metric system of measurement is 
used. 

Deadweight carrying capacity. — The difference beween 
the displacement "light" and the displacement "loaded" 
indicates the maximum carrying capacity of a ship, and 
is also known as its deadweight tonnage. This dead- 
weight tonnage is therefore measured by the same unit 
as displacement tonnage, namely, a ton of either 2,240 
or 2,204.62 pounds avoirdupois. A ship has a different 
deadweight capacity for coal than for cotton because of 
the difference in the specific weight of these commodities. 
This term is not ordinarily applied to passenger or to 
combination passenger and freight' ships, but usually 
serves as the basis of chartering pure cargo vessels en- 
gaged under a time charter. 

Registered tonnage. — The third class of ship tonnage 
is the registered tonnage, which gives the cubic con- 
tents of the space in a ship, as defined by rules adopted 
by the different governments of the sea-faring nations, 
or by the rules of such companies as the Suez Canal 
Company. This space is measured in tons of 100 cubic 
feet, a unit proposed in 1852 to the British Government 
by Mr. George Moorsom, and first incorporated in the 
British measurement law of 1864 and since then adopted 
by the leading maritime nations of the world. The 
United States, for instance, adopted the Moorsom rule 
in 1864. According to the national gross tonnage rules 
of the United States, as interpreted by the Commissioner 
of Navigation, the following spaces are exempted from 
measurement : 

"(1) Sheltered places or superstructures with openings 
at the sides or ends. This exemption was the result of 
the way in which the rules were interpreted by the 



CARGO AND CARRYING CAPACITY 215 

United States Commissiqner of Navigation on Septem- 
ber 5, 1914. 

"(2) So-called shelter-deck spaces, i. e., spaces beneath 
a 'shelter deck' with approved 'tonnage openings.' This 
exemption was not allowed prior to March 16, 1915, and 
is also the result of the interpretation of the national 
measurement rules by the Commissioner of Navigation. 
Both of these exemptions had for many years been grant- 
ed under the measurement rules of Great Britain, and 
had also been accepted in Germany since 1895, w*hen 
the endeavor to induce Great Britain to measure all 
enclosed superstructures and sheHer-deck spaces was 
abandoned. 

"(3) Passenger accommodations in tiers of superstruc- 
tures over the first tier above the upper deck. 

"(4) Hatchways up to one-half of 1 per cent of the 
vessel's gross tonnage. 

"(5) Galleys, bakeries, toilets and bath houses above 
decks. 

"(6) Spaces above decks occupied by the ship's mach- 
inery or for the working of the vessel. 

"(7) Light and air and funnel space over the engine 
and boiler room to the extent that such space is above 
the upper deck, or the shelter deck, when special request 
is made by the shipowner to have the space measured. 

"(8) Domes and skylights and companionways (ex- 
cept portion used as a smoking rpom), and ladders and 
stairways located in exempted spaces. 

"(9) Double bottoms for water ballast since March 2, 
1895, and other spaces adapted only for water ballast 
since February 6, 1909. 

"(10) Open spaces occupied by deck loads."^ 

1 Johnson and Huebner, Principles of Ocean Transportation, pp. 
lis, 116, 



216 OCEAN SHIPPING 

Gross and net Registered tonnage. — Because of these 
deductions, gross registered tonnage does not indicate 
the real gross capacity of a vessel. The same holds true 
of the net registered tonnage, which is calculated toy de- 
ducting from the gross tonnage the cubic contents of 
certain spaces. Under the national measurements rule 
of the United States these spaces are as follows : 

"(1) Spaces occupied by the propelling machinery and 
fuel. 

"(2) Spaces occupied by or appropriated to the use 
of the crew, officers and master, subject to the naviga- 
tion laws, which specify that a minimum crew space 
varjang from 72 to 120 cubic feet and from 12 to 16 
square feet of floor space per man must be provided on 
American vessels. 

"(3) Spaces used exclusively for the working of the 
helm, capstan and anchor gear, unless they are located 
above decks and consequently have been excluded from 
gross tonnage. 

"(4) Spaces used for keeping charts, signals, and other 
instruments of navigation. 

"(5) Spaces occupied by the donkey engine and boiler 
if located below decks and connected with the main 
pumps of the vessel. 

"(6) Spaces required for boatswain's stores. 

"(7) Galleys, bakeries, toilets and bath rooms for the 
accommodation of officers and crew, when situated below 
decks. 

"(8) Spaces on sailing vessels used for the storing of 
sails not exceeding 2>4 per cent of the gross tonnage."^ 

ilbid, p. 119. 



CARGO AND CARRYING CAPACITY 



217 



Various tonnage calculations. — ^The fact is that neither 
the gross nor the net registered tonnage gives a true 
picture of the ship's capacity. When, therefore, the Suez 
Canal Company, and later the Administration of the 
Panama Canal, determined to make the net registered ton 
the basis for the calculation of tolls to be charged, a new 
set of rules was adopted which does not differ materially 
in the case of the two great inter-oceanic canals, and it 
is to be hoped that some day an international agreement 
will be reached towards establishing a uniform system 
throughout the world. The following table indicates the 
degree of difference existing at present between the 
several tonnage calculations outlined above: 



COMPARATIVE TONNAGE STATEMENTi 



VESSEL 


British 
Register 
Tonnage 


American 
Register 
Tonnage 


Panama 
Tonnage 


Suez 
Tonnage 




Gross 


Net 


Gross 


Net 


Gross 


Net 


Gross 


Net 


Kentuckian 

Santa Rosalia.. . . 
Kirkdale 


6,515 
5,409 
4,732 


4,086 
3,488 
3,047 


6,582 
5,834 
5,352 


4,084 
4,392 
3,469 


7,041 
5,865 
5,359 


4,891 
4,530 
4,011 


6,569 
5,580 
5,101 


4,875 
4,453 
3,929 



It will be noted thai? in each case the Panama Canal Tonnage is the highest figure 
with either Suez tonnage or American Register tonnage second. 



' Adapted from Johnson & Huebner, op. cit. p. 123. 

Cargo, weight, and measurement tons.— Now, when 
we come to the measurement of cargo we find that the 
same division into measurements of weight, and measure- 
ments of volume or cubic contents is found. The 
weight ton of the cargo is the same as the displacement 
ton and the deadweight ton in the case of a ship, but 
the measurement ton of cargo is only 40 cubic feet as 



218 OCEAN SHIPPING 

compared with 100 in the case of the ship. The result 
is that 2j4 measurement tons of cargo will fit into 1 
registered ton, ship measurement. It is for this reason 
that, frequently, the deadweight capacity of a ship is 
calculated at 2j^ times the figure of its net registered 
tonnage. 

"For a modern freight steamer the following relative tonnage 
figures would ordinarily be approximately correct: 

Net tonnage 5,250 

Gross Tonnage 6,850 

Dead-weight carrying capacity 10,000 

Displacement, loaded, about 13,350' 

We are now able to resume our discussion of the ton- 
nage requirements of different commodities. When the 
ship is about to be loaded with a certain commodity the 
most important figure which the ship-owner or ship- 
agent has to know is the stowage factor, that is, the 
figure which represents the number of cubic feet of cargo 
space in which a long ton, (2,240 pounds) may be 
stowed. It is customary in shipping practice to quote 
freight rates on the basis of "weight or measurement, 
ship's option,'' that is to say, if the cargo measures more 
than it weighs, the freight charge is calculated on the 
basis of cubic feet; if it weighs more than it measures — 
on the basis of pounds or weight tons. A commodity 
weighs more than it measures if it weighs more than 
56 pounds per cubic foot, the figure 56 being arrived at, 
by dividing 2,240 (the number of pounds in the cargo 
weight ton) by 40 (the number of cubic feet in a cargo 
measurement ton). It was the assumption that the 
average weight per cubic foot of all commodities was 

1 From E. N. Hurley, The New Merchant Marine, 1920, p. 276. 



CARGO AND CARRYING CAPACITY 219 

56 pounds, which led to the adoption of a cargo measure- 
ment ton of 40 cubic feet. Another explanation is that 
40 cubic feet was made the standard, because this hap- 
pened to be the load factors of Russian wheat, at one 
time the rnost important staple product carried by ships.^ 
General classification of commodities. — From a ship- 
ping standpoint, commodities are generally divided into 
three main groups: 

(1) Rough, low price commodities, such as coal, tim- 
ber, ores, stones, slates, fertilizers and the like. 

(2) Bulky commodities of medium value, such as grain 
and other foodstuffs, textile materials, crude met- 
als, oleaginous produce, petroleum, hides, skins, 
and leather, and the more bulky manufactured 
goods. 

(3) Fine goods of all kinds which are of high value 
in relation to their bulk. 

Tables of Unit Displacement of Commodities. — In 1919 
the Bureau of Research and Statistics of the War Trade 
Board compiled a list of the most important ship car- 
goes, a copy of which was mailed to the American Ex- 
peditionary Force, at the request of the General Staff, 
and which, since the time of its publication, has been in 
constant demand as a source of current reference.^ In 
order to show the nature of the plan as well as the degree 
of its completeness we herewith reproduce part of the first 
page of the list. 

1 See B. O. Hough, Ocean Traffic and Trade, pp. 110, 111. 

2 Of equal interest is a circular of the Bureau of Standards, De- 
partment of Commerce, entitled, Table of Unit Displacement of 
Commodities. This publication gives the weight per cubic foot, 
space per short ton, space per long ton and methods of packing of 
a large list of commodities. 



220 



OCEAN SHIPPING 





STOWAGE OF SHIP CARGOES 








Meas- 






Commodity. 


Package. 


Gross 


ure- 


Stow- 


Remarks. 






Weight. 


ment. 


age. 


, 


Abrasives. 


Case 


178 


8-9 


110 


For optical use; carborun- 
dum stone and drilling 
diamond. See also Car- 
borundum, Emery, 
Grindstones, etc. 




Barrel 


238 


8-11 


S3 






Drum 

Barrel 

Barrel 


845 

475 
600 


24-3 

12-0 
13-8 


70 

60 
60 


110 gallons. 


Acid: 








Boracic 


Barrel 


350 


10-0 


70 






Barrel 


275 


8-0 


65 




Carbolic 


Barrel 


500 


12-0 


60 






Case 


237 


8-0 


65 






Drum 


1,100 


24-3 


54 




Carbolic cryst. . 


Case 


84 


2-8 


71 






Drum. ..... 


315 


10-3 


79 




Hydrochloric. . . 


Barrel 


344 


11-11 


78 






Carboy 


190 


6-0 


80 






Carboy 


235 


8-0 


83 














See Acid, Hydrochloric. 


Nitric 


Barrel 

Carboy 


213 
190 


9-0 
8-0 


94 
94 










Carboy 


210 


6-0 


70 




Oxalic 


Barrel 

Barrel 


254 
375 


7-0 
10-3 


67 
67 










Barrel 


401 


10-6 


63 






Barrel 


374 


10-6 


67 




Phosphoric 


Demijohn. . 


120 


6-0 


112 


5 gallons. 


Salicylic 


Barrel 


120 


7-8 


157 






Barrel 


120 


7-3 


150 






Barrel 


119 


7-8 


144 




Stearic 


Bag 


223 


5-0 


SO 






Bag 


202 


4-8 


52 




Sulphuric 


Carboy 


229 


8-0 


59 






Carboy. . . . 


250 


6-0 


55 






Drum 


1,620 


22-0 


33 






Drum 


1,720 


24-3 


33 


110 gallons. 




Drum 


900 


11-7 


31 


55 gallons. 


Tartaric 


Barrel 


260 


7-0 


60 






Barrel 


250 


7-2 


64 


Import. 


Advertising matter 


Bale 


106 


3-0 


63 






Case 


600 


15-0 


56 






Case 


224 


8-0 


80 






Case 


1,050 


30-7 


65 






Case 


72 


2-0 


62 




Aeroplane parts. . 


Case 


351 


5-0 


32 






Case 


280 


3-0 


24 




Aeroplane propel- 












ler and parts. . . 


Case 


759 


61-6 


182 




Agar-agar 


Bale 


230 


7-3 


70 






Bale 


284 


9-8 


76 


Import. 


Agricultural im- 












plements parts . 


Package... 


280 


2-11 


23 






Package. . . 


145 


1-8 


26 






Package. . . 


425 


5-8 


30 






Package. . . 


683 


8-9 


28 





Note. — Measurements are given, in conformity with shipping practice, in cubic feet 
and twelfths of a cubic foot.- Thus, "8-9" signifies eight and nine-twelfths cubic feet. 

Stowage represents the number of cubic feet of cargo space in which a long toij 
(2,240 pounds) may be shipped. Thus, 110 cubic feet is the cargo space required for a 
ton of abrasives packed in cases averaging 178 pounds gross and measuring 8-9 cubic 
feet. • 



CARGO AND CARRYING CAPACITY 



221 



Stowage factors of some important commodities. — 

Furthermore, we have extracted from the bulletin, which 
covers sixty-nine pages, the data referring to the most 
important commodities : 



Commodity. 


Package. 


Gross 
Weight. 


Meas- 
ure- 
ment. 


stow- 
age. 


Remarks. 


Asphalt 

Ballast 


Bag 

Bulk 


206 


5-3 


57 
. 24 


Clay. 




Bulk 






20 
20 
122 
58 
67 

50 
50 

43 
60 
50 

121 
71 

200 
60 
65 
57 
62 
63 
60 

60 
61 
40 
15 
12-17 
62 

60 

46 

60 
60 
96 




Bulk 






Sand 


Bananas 

Bariey 


Bunch 

Bulk 


55 


3-0 




Beans (Soy). . . 
Brick (com- 
mon) 

Burlap 


Bag 

Barrel 

Bale 


100 
400 


3-0 
9-0 




Coal (bitu- 
minous. . . . 


Bulk 








Cofiee, gteen. . 
Com 


Bag 

Bulk 


131 


5-1 


Varies. 


Cotton (Am.) . 
Flax seed 


Bale 

Bale 

Bale 

Bulk 


600 
452 
480 


27-0 
14-5 
43-0 


Compressed. 
High density. 
Uncompressed. 


Flour (wheat) . 

Guano 

Tute 


Barrel 

Bag 

Bale 

Barrel 

Barrel 

Barrel., ... 

Barrel 

Bag 


217 
141 
395 
426 
471 

448 
435 
275 


6-9 

3-7 

11-0. 

12-0 

12-8 

11-11 

12-0 

5-0 




Kerosene 

Oil (cocoanut) 
Oil (cotton- 
seed) 

Oil (fuel) 

Ore (beauxite) 




Ore»(iron).. . . 










Peanuts 

Petroleum 

(crude) 

Potash 

Quebracho 

wood 


Bag 

Barrel 

Bag 

Bag 


102 

450 
250 


2-10 

12-0 
5-^ 


Shelled, from 
Japan. 


Rice 


Bag 

Bag 


224 
140 


6-0 
6-0 




Rubber (crude) 


Varies. 



222 OCEAN SHIPPING 

REFERENCES 

Hurley, E. N. The New Merchant Marine. (1920). 

Johnson, E.^R. Measurement of Vessels for the Panama Canal. 
(1913). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
IX. (1919). 

National Foreign Trade Council. Ocean Shipping. Sec, Ed. 
1917. 

United States. (War Trade Board, Bureau of Research and Sta- 
tistics). Stowage of Ship Cargoes. (1919) 
(Department of Commerce, Bureau of Standards). Table of 
Unit Displacement of Commodities. (1919). 



CHAPTER XII 
COAL— THE KEY TO THE CARRYING TRADE 

Coal a corner-stone of British Maritime supremacy. — 

Of all the multitude of commodities that are carried by 
the ships of the world, coal is in a class by itself. An 
unknown Eng'lish writer of the seventeenth century 
said : "The coal trade is indeed the refuge and mother 
of our entire shipping industry." It represents a very 
large proportion of the railroad traffic of industrialized 
countries, but it has an even greater significance for 
ocean shipping than for land transportation. This sig- 
nificance can best be explained in the light of British 
experience. 

England, more than any other country, has been 
an exporter of coal. It is therefore valuable to know 
what Englishmen think of the importance of the coal 
trade to their country. They duly recognize in their 
coal exports one of the three pillars upon which their 
monumental carrying trade rests. In the British Board 
of Trade report on "Shipping and Shipbuilding Indus- 
tries" to which we referred before, we read as follows: 

"In the period up to the outbreak of the war we were 
the ocean carriers of the world. Our carrying trade was 
dependent on three main factors: 

(a) The strong industrial position of the United King- 
dom itself, based on free access to the markets of 
the world for foodstuffs and raw materials. — 
223 



224 OCEAN SHIPPING 

(b) A world-wide Empire with well-distributed coal- 
ing stations and ports of call. — 

(c) A large coal export trade which provided ships 
with outward freights which would otherwise have 
been lacking."^ 

Another departmental committee was appointed by the 
British Board of Trade to report on the position of the 
coal trade after the war. The chairman of this commit- 
tee was the late Lord Rhondda, formerly Mr. D. A. 
Thomas, the head of the great Cambrian Coal Combine. 
The committee saw fit to introduce its report by an 
"essential preliminary consideration" as follows: 

British appreciation of the economic significance of 
coal exports. — "The report is drawn up on the assumption 
that it is essential to the national interest that the ex- 
port coal trade which before the war amounted to about 
one-fourth of the entire output, should not only be main- 
tained, but that every efifort should be made to increase 
it. 

"If the export of coal were stopped, or even material- 
ly reduced, this would result in the throwing out of 
employment of a vast and varied body of workers, and 
the loss of a very large amount of wealth to the country, 
now distributed in wages and in the maintenance of in- 
dustry. It would have a serious effect on the shipping 
tonnage carrying on the overseas trade from our ports 
and would raise the level of homeward freights and in- 
crease materially the cost to the country of foodstuffs 
and raw materials. It would increase the cost of pro- 
ducing coal required by every industry and householder 
in the country. It would lead to a serious depreciation 

1 Board of Trade Report on Shipping and Shipbuilding Industries 
After the War, p. 71. § 123. 



COAL—TH-E KEY TO THE CARRYING TRADE 22S 

of railway and- dock property, and might even cause the 
ruin of some of the companies carrying on these under- 
takings."^ 

England's natural advantage as a coal exporting coun- 
try. — To understand any economic situation one must 
know what lies back of it. The roots of so enormous a 
plant as the British coal trade, which spreads its branch- 
es to almost every -corner of the globe, lie far back in 
the geological make-up and economic history of the 
British Isles. Nature seems to have' wanted England 
to be an exporter of coal for it seems as if she had 
striven to unite with the excellence of quality of Eng- 
land's coal, the greatest possible accessibility of the very 
coal fields whose product happens to be ideally suited 
to exporting purposes. We refer to the steam coal of 
Newcastle, the gas coal of Durhamshire, so badly needed 
on the continent, and, last but not least, the world-re- 
nowned Welsh coal of Admiralty fame. In all those 
fields ships come within a score of miles of the pithead. 

When Emerson said, "Steam is an Englishman," he 
meant to say that for a long time, England was pre- 
eminent in the application and exploitation of a great 
line of inventions, based upon steam, ushered in by such 
men as Newcomen, Watt, Stephenson, etc. These inven- 
tions stimulated coal mining in general and thus, indi- 
rectly, helped the export of the coal mined in those parts 
of the country which, from a transportation standpoint, 
lay nearer to foreign than to domestic centres of con- 
sumption. 

England's merchant marine the greatest consumer of 
bunker coal. — The maritime supremacy of Great Britain, 

1 Report : Coal Trade After the War, p. 4. 



226 OCEAN SHIPPING ' 

while largely due to a series of victories over successful 
rivals, was not complete until the steamship replaced the 
sailing vessel. England led in the transition from sail 
.to steam. Her possession of the largest fleet of steam- 
ships made her the greatest consumer of bunker coal, 
not only in her own liome ports but also in all those 
distant way-stations which dot the trade routes of the 
world. This unique system of coaling stations could 
never have been built up by a nation less fortunate in 
the possession of colonies on every continent, and its 
development was greatly aided by England's political 
control over numberless islands, which lie as though 
deliberately placed at strategic points of the transporta- 
tion system. 

Growth of British coal exports. — ^To understand the 
significance which coal exports have for the shipping 
industry as a whole we must know the amount of coal 
exported, keeping in mind the fact that because of its 
favorable stowage factor, coal is an exceptionally desirable 
cargo. 

TABLE SHOWING QUANTITY OF COAL LEAVING 

UNITED KINGDOM PORTS DURING. 

SELECTED YEARS 

Year Exported as cargo Shipped as bunker in Total 

ships engaged in 
foreign trade 
(In millions of tons) 

18S0 3.2 

1860 7.1 

1870 10.2 3.3(1873) 

1880 17.9 4.9 22.8 

1890 28.7 8.1 36.8 

1900 44.1 11.8 55.9 

1907 63.6 18.6 82.2 

1913 73.4 21.0 94.4 

1918 34.2 8.8 43.0 

1919 3&S 12.0 50.S 



COAL— THE KEY TO THE CARRYING TRADE 121 

Secondly, we must know in what manner these enor- 
mous quantities were distributed over the surface of 
the earth. In order to show this distribution, British 
statistics divide the world into ten groups of markets 
as follows: 

1. France, Channel Islands, Portugal, Azores and 
Madeira,' Spain and Canaries, Gibraltar, Italy, Malta, Egypt, 
Austria-Hungary, Greece, Bulgaria, Roumania, Turkey, 
South Russia, Tripoli, Tunis, Algeria, Morocco, etc. 

2. North Russia, Sweden, Norway, Denmark, Germany, 
Holland, Belgium, Iceland and Whale Fisheries. 

3. Brazil, Uruguay, and Argentine Republic. 

4. West Qoast of Africa, Ascension, and St. Helena. 

5. British South Africa. 

6. Indian Continent. 

7. Ceylon, Straits Settlements, Java and other Dutch 
Possessions in India, Philippine Islands, Siam, Hong-Kong, 
China, Japan, Australasia, and Pacific Islands. 

8. British North America, United States [Atlantic], 
British West Indies, Mexico, Central America, Columbia, 
and Venezuela. 

9. Peru, Ecuador, Chile, Bolivia, and United States 
[Pacific]. 

10. East Coast of Africa, Mauritius and Dependencies, 
Bourbon, Arabia, Persia, Aden, etc. 



228 



OCEAN SHIPPING 



Geographical distribution of British Coal exports. — 

In the following table/ the numibers inserted at the head 
of each column refer to these groups of markets: 

STATEMENT SHOWING THE QUANTITY OF THE EX- 
PORTS OF COAL 

(In thousands of tons) 

Frcan the United Kingdom to the Principal Groups of Foreign Coun- 
tries and British Possessions for Selected Years from 1850 to 1908. 
The groups are indicated on the chart : 



YEAR 


1 


2 


3 


4 


S 


6 


7 


8 


9 


10 


ISSO 


1,327 


1,216 


12 


9 


26 


97 


34 


365 


60 


68 


1860 


2,452 


3,029 


33 


27 


89 


146 


308 


710 


204 


77 


1870 


4,038 


4,960 


.50 


27 


92 


293 


336 


777 


465 


167 


1880 


6,213 


8,299 


125 


168 


146 


655 


632 


782 


562 


309 


1890 


9,252 


14,766 


3B1 


264 


282 


686 


747 


449 


1,454 


477 


1900 


18,108 


21,068 


62.5 


708 


254 


100 


765 


182 


1.977 


302 


1908 


26,100 


29,300 


488 


85 


233 


198 


473 


317 


4,697 


592 



Probably because of the complete dislocation of the 
British coal export trade caused by the war, the statisti- 
cal data for the last few years have not been arranged 
in the same manner. However, the same information 
is contained in the table on page 229 which covers the years 
1913-1919.^ 

It will be noticed in both tables that the bulk of ex- 
ported coal moves towards groups I and II, that is 
towards the European continent and to non-European 
ports of the Mediterranean, or, primarily, to the great 
coaling stations such as Port Said, Gibraltar, Malta, etc. 
As far as the exports to the nearby continent are con- 
cerned the traffic is largely in the nature of a ferry 

1 These figures should be studied in conjunction with the load 
factor statistics, given in Chapter II, p. 28. 

" From Annual Report of the Chamber of Shipping of the United 
Kingdom, 1919-1920, p. 147. 



COAL— THE KEY TO THE CARRYING TRADE '229 



UNITED KINGDOM 



48 

42 
39 
36 




service. Colliers speed across the Channel or the North 
sea from Newcastle and the Humber ports and return 
in ballast as soon as they have discharged their cargoes. 
But the situation is different with the Baltic and the 
White Sea trade, and the traffic to the Mediterranean em- 
phasizes this difference still further; In both cases the 



230 OCEAN SHIPPING 

majority of ships taking the coal from England and 
Wales to its destination; — Scandinavia, Spain, Italy, 
Gibraltar, Port Said, Constantinople, etc., bring back to 
England or northwestern continental ports, lumber from 
the White Sea or Scandinavia, grain from the Black 
Sea, cotton fro'm Egypt, ore from Spain, etc. Coal, in 
other words, holds the balance against a variety of im- 
ports, thereby giving the carrying trade if not all-around 
employment, at least much better employment than 
would be the case in the absence of coal. 

Distant markets emancipated from British coal supply. 
— The value of this return freight service rendered by 
the coal export trade increases in importance in pro- 
portion to the distance of the sources of siipply of the 
imports of raw materials and foodstuffs which are 
broug'ht into the United Kingdom and the industrial 
countries of the northwestern section of the European 
continent. Therefore, the greatest benefit to British 
shipping is derived from those branches of the coal ex- 
port trade which reach to the far-distant over-sea mar- 
kets of the non-European continents. There was a time 
when British coal was readily marketed in almost every 
part of the world, witli the single exception of the At- 
lantic coast of North America, but during the last twenty 
years the most valuable -portion of the British coal ex- 
port trade — the export to distant over-sea markets — has" 
suffered from severe competition on the part of Great 
Britain's own over-sea possessions as well as from her 
foreign rivals. This fact is disclosed by the table on 
page 231, which shows the rapid growth of coal production 
of British over-sea possessions and foreign countries 
vwhich formerly depended on British coal: 



COAL— THE KEY TO THE CARRYING TRADE 231 

PRODUCTION OF COAL 
(In million tons ') 

South Aus- - New- 
Africa India Canada tralia Zealand Japan Chile 
1885 1.3 1.7 3.1 0.5 1.3 

1889 2.1 

1890 0.1 2.2 2.8 3.5 0.6 2.6 

1895 ........ 1.2 3.5 3.1 4.3 0.7 4.8 

1900 ..r 2.1 6.1 5.2 6.4 1.1 7.4 

1905 i.7 8.4 7.7 7.5 1.6 11.8 

1908 4.9 12.8 ... 10.2 

1909 4.9 12.8 9.3 10.2 1.9 14.7 

1913 8.8 16.3 10.7 10.4 1.9 17.1 1.3 

1914 9.5 16.5 9.6 10.4 2.3 17.3 1.1 

1915 9.3 16.4 9.5 9.4 2.2 15.5 1.7 

1916 11.2 16.4 9.5 * 8.1 2.3 17.5 1.4 

1917 10.9 17.3 8.7 ... 2.1 19.9 1.5 

1918 9.9 20.8 

1919 

In normal years China exports almost 1J4 million tons of coal. 

The result of this rapid development of new coal fields 
in overseas countries has been that to-day little British 
coal is sold east of Aden, and that exports to South 
Africa have practically ceased, Natal and the Transvaal 
having themselves become coal exporting countries. To- 
day the South American market is the only important 
distant field in which large amounts of British coal find 
a ready sale. Although, even here, Chile has become, 
and Peru threatens to become, a strong rival as far as 
. the West Coast is concerned. , On the East Coast, espe- 
cially in Argentine, British coal has to compete among 
others with South African coal. 

German competition. — But there was another kind of 
competition with which the English coal exporter had 
to reckon. Before the war, Germany, realizing the 

1 Compiled from various sources which even if the fact is not 
always indicated, give quantities in different tons, therefore figures 
are to be taken as approximate only. 



232 OCEAN SHIPPING 

enormous value of coal export from a shipping stand- 
point, had entered mainly through the Rheinisch-West- 
falische Kohlen-Syndikat, upon a systematic campaign to 
force England to yield, foot by foot, the markets which she 
had once considered her exclusive domains. The war 
has written "finis" to this chapter, at least for a consid- 
erable time to come. • 

American competition. — Of more recent date, but far 
more formidaJble to-day, is the competition which this 
country offers to the British coal exporter. Until the 
war threw the mechanism of world .trade out of joint, 
American coal was exported almost exclusively to ad- 
jacent territory, tha't is, chiefly to Canada, the West 
Indies and Cuba. Beyond these limits American coal 
went only in negligible quantities, figuring in European 
imports only when some extraordinary event, such as 
the miner's strike in England, or a war, raised coal prices 
and freight rates far beyond their normal level. Bat 
what was abnormal before the war has, in many cases, 
become normal. Freight rates continue to soar and the 
British coal price continues to rise considerably beyond 
the American figure, thus inviting American competition 
into markets such as France, Italy, etc., formerly con- 
sidered immune by the British exporter. The rapid , 
growth of American coal exports is graphically pre- 
sented in the chart on page 233.' 

Growth of American coal exports. — This situation was 
well described by a coal exporter'' at the Seventh Na-', 

* From the Annual Report of Chamber of Shipping of the United 
Kingdom, 1919-1920, p. 149. 

^American Coal and Its Relation to Our Foreign Trade, address 
by E. D. Enney, President, Williams Cory-Mann George Corp., de- 
livered before the Seventh National Foreign Trade Convention, San 
Francisco, Cal., May 14, 1920. 



rONS 

MkUON» 



COAL— THE KEY TO THE CARRYING TRADE 233 
COAL EXPORTS FROM THE UNITED STATES 




'WM mxiSM ran nvi itos •>«> jaot iMt .raar 
Figures for 1920 estimated 



from latest 



M itti KM i«» j»o ar' iM I 

data by the author 



234 CCBAN SHIPPING 

tional Foreign Trade Convention, San Francisco, May, 
1920. We have extracted the following two paragraphs 
from this valuable and interesting address: 

"Prior to 1914 our total exports had never exceeded 
9 million tons in any year, and less than 2 million tons 
of this were actually carried overseas, the bulk of the 
shipments going to Cauda, East Coast of South America, 
Mexico and the West Indies. The great movement of 
American coal to Europe and South America began in 
the early part of 1915, and something more than 23 mil- 
lion tons were shipped that year. Shortage of vessel 
tonnage and submarine warfare subsequently so interfered 
with shipments that there was no marked increase in 
the volume of our coal sales abroad until 1919, when 
a record in the yearly volume of shipments of American 
fuel was made. Had not the miners' strike in Novem- 
ber occurred, with its consequent loss of production, 
and Governmental restriction of exports, which was 
maintained in effect until May 1st, the total exports of 
American coal in 1920 should have reached 30 million 
tons.'' Without further serious labor interruptions, and 
assuming that there will be a gradual improvement in 
the car supply, it may yet be possible to ship a quantity 
this year which will come close to this figure. The 
ability to increase our exports of coal beyond the 30 
million mark will depend entirely upon whether the bitu- 
minous-icoal-carryihg railroads will find it expedient to 
improve their tidewater handling facilities. Our exports 
of coal are limited obviously by railroad facilities to 
transport and dump coal, and in view of the present 

' As a matter of fact this figure was actually exceeded by several 
million tons. 



COAL— THE KEY TO THE CARRYING TRADE 235 

shortage of necessary labor required to handle it over 
the piers and trim the coal into vessels, and of "the fact 
that little has been done recently in the way of added 
terminal equipment, the limit has about been reached. 

"Of particular interest is the shipment of American 
coal for bunkering purposes. Previous to the war the 
United States was not an important factor in the supply 
of bunker coal, that is to say, the coal required by a 
steamer for its own propulsion. It is true that for years 
foreign steamers have called at our ports to replenish 
bunkers, but it is not long ago that vessels came out 
from Scandinavia, Holland, France, England and Medi- 
terranean countries, supplied with British or German 
coal for the round voyage ; and comparatively small 
quantities, if any, were taken here. With Germany and 
France unable to produce sufficient for their own needs, 
and the United Kingdom production per man diminished 
by 30 per cent, the Eastern and Gulf coal ports of the 
United States are securing a rapidly increasing share 
of the world's ships fuel supply. Practically all liner 
tonnage plying between the United States and Europe 
are compelled to coal here, as are. practically all the lines 
operating from Europe to the Far East through the 
Panama Canal. Many American firms have established 
bunkering depots in the West Indies and at the prin- 
cipal ports on the East and West coasts of South 
America. At least three important stations are main- 
tained in the Mediterranean, and eventually private en- 
terprises will displace the United States Government as 
suppliers of steamship fuel at or near the approaches of 
the Panama Canal." 

Geographic distribution of American coal exports. — 
It is of interest to study the geographic distribution of 



236 



OCEAN SHIPPING 



our coal exports. The following table supplies the neces- 
sary data. 



EXPORTS OF ANTHRACITE AND BITUMINOUS COAL 

FROM THE UNITED STATES BY COUNTRIES DURING 

THE CALENDAR YEAR 1919 

Anthracite Bituminous 

Countries Tons Tons 

Austria-Hungary 18S 212 

Azores and Madeira Islands ... 32,856 

Belgium 200 

Denmark .' 88,903 

France 2,529 523,243 

Germany 20 8,540 

Gibraltar 20,291 

Greece 48,120 

Italy 9,355 1,632,995 

Netherlands 2 722,191 

Norway 2 159,843 

Portugal 45 45,178 

"■v-pain 680 18,623 

Sweden 100 252,891 

Switzerland 528,575 

Turkey in Europe 201 4,205 

England 6,588 

Bermuda 2,966 19,438 

British Honduras 1 601 

Canada 4,344,564 10,669,490 

Costa Rica 1,717 

Guatemala .• 51 3,893 

Honduras 996 8,357 

Nicaragua 154 2,026 

Panama ... 72,097 

Salvador ... 2,243 

Greenland ... 1,217 

Mexico 4,458 101,679 

Miquelon, Langley, etc 368 

Newfoundland and Labrador 12,215 4,207 

Barbados 304 107,635 

Jamaica 5 33,088 

Trinidad and Tobago 2 41,319 

Other British West Indies 393 28,038 

Cuba 51,856 971,399 



COAL— THE KEY TO THE CARRYING TRADE 237 

EXPORTS OF ANTHRACITE AND BITUMINOUS COAL 

FROM THE UNITED STATES BY COUNTRIES DURING 

THE CALENDAR YEAR 1919— Continued 



Countries 



Danish West Indies . . 
Dutch West Indies . . 
French West Indies . 

Haiti 

Dominican Republic . 

Argentina 

Brazil 

Chile 

Colombia 

Ecuador 

Falkland Islands . . . . 

British Guiana 

Dutch Guiana 

Peru 

"Uruguay 

Venezuela 

Dutch East Indies . . . 

Russia in Asia 

Turkey in Asia 

New Zealand 

Other British Oceania 
Philippine Islands . . . 
British West Africa . . 
British East Africa . . 

Canary Islands 

French Africa 

Italian Africa 

Portuguese Africa . . . 
Egypt 



Anthracite 


Bituminous 


Jons 


Tons 


> • • 


15,346 


■ • ■ 


24,694 


> ■ > 


23,934 


2 


. , . 


8,530 


13,690 


25 


483,389 


1,691 


634,109 


231 


93,618 


723 


11,835 




2,948 




15,208 


30 


3,746 




1,001 


400 


45,819 


• • . 


194,997 


2 


496 




13,221 




3 


101 




... 


50,034 
1 


2044 




4,159 


> > . 


6,174 




19,587 


• * > 


52,001 


* . • 


5,166 


■ > > 


43,892 




37,543 



Total 4,443,391 



17,958,514 



From these figures it appears that to the United States 
coal exporter, Canada and Mexico mean much the same 
as does the near-by European continent to his British com- 
petitor. The Caribbean — ^potentially at least — is his Medi- 



238 OCEAN SHIPPING 

terranean, and the overseas markets have similar signifi- 
cance for both countries. 

Economic value of British and American coal exports 
compared. — But when we wish to carry this comparison 
between British and American coal exports further, we 
find a fundamental difference in the foreign trade situa- 
tion of the two. countries. Our chart showing the bulk 
of American exports and imports revealed the fact that 
the weight of our exports exceeded that of our imports 
even before we had a large coal export trade. But the 
situation is very different as far as Great Britain is con- 
cerned. The following table shows the weight (in mil- 
lion tons) of imports into the United Kingdom and the 
weight of the coal exported from that country:^ 

Raw Other 

Year Food Material Imports Total Coal 

Imports Imports {Weight Imports Exports 
Estimated) 

1913 17.4 34.9 7.1 S9.3 73.4 

1914 15.7 28.8 6.1 50.6 59.0 

1915 IS.S 27.9 5.9 49.3 43.5 

1916 ;.. 14.5 24.2 5.3 44.1 38.4 

1917 12.8 18.7 4.3 35.8 37.8 

1918 10.9 20.5 4.3 35.7 34.2 

1919 13.0 23.S 5.0 41.5 38.5 

From this table we learn that in 1913 and 1914 coal 
was more than sufficient to keep the balance to British 
imports and to a part of the commodity movement going 
to the northwestern part of Europe. 

British coal Europe's great return cargo. — British coal 
is practically the only bulk commodity wWch moves in 
large and regular volume from Northwestern Europe to 

1 See Annual Report, 1919-1920, Liverpool Steamship Owners' 
Association. 



COAL— THE KEY TO THE CARRYING TRADE 239 

the overseas lands. As such it is the one commodity 
which the tramp steamers bringing raw materials and 
foodstuffs to Northwestern Europe can take out. Mr. 
Edgar Crammond, in "The English Shipping Industry," ^ 
states this fact as follows : 

"It was the fact that they had not enough outward freight that 
presented such difficulties to Continental shipping companies. Many 
of these even came to England to load with coal before setting out 
on their voyage. India was the greatest factor in the export trade. 
The key to the Indian Ocean was the Suez Canal, and the key to 
the Suez Canal was the British coal export; so that when they 
talked about stopping the export of coal it must be remembered that 
it would mean a redistribution of the whole of the trade routes 
of the world." 

Without British coal to defray part, or all, of the out- 
going expenses these imports would have to pay for the 
round trip from Europe out to the foreign markets in 
ballast and back with the respective commodities, graih, 
ore, cotton, or lumber, as the case might be. In other 
words, import freight rates would have to be raised by 
the amount of the export coal rate. In many cases, such 
an increase would make freight charges appear prohibi- 
tive and in all cases, it would put a burden upon the 
European industries which turn the imported raw ma- 
terials into finished products and employ the masses of 
labor for whose sustenance the foreign foodstuffs are 
imported. The relation of the export coal freight rates 
to the import freight rates is shown by the table on page 
240, which the author compiled for a treatise on the 
"History, Organization and Significance of the British 
Coal Export Trade" : 

1 p. 23. 



240 



OCEAN SHIPPING 



TABLE SHOWING COAL RATES CARDIFF TO LA PLATA 

AND THEIR EFFECT ON WHEAT ■ RATES 

LA PLATA TO EUROPE 





Wheat 


Coal 






Wheat 


Coal 




Freight 


Freight ^ 






Freight 


Freight 


Date 


La Plata 


CardifiE 


Date 


La Plata 


Cardiff 




to Europe 


to La Plata 






to Europe 


to La Plata 


1910 


s. d. 


s. d. 


1910 


s. d. 


s. d. 


July 3 


13 6 


13 3 


Oct. 


2 


16 6 


10 6 


10 


11 6 


12 lOH 




9 


16 6 


10 6 


17 


10 6 


13 9 




IB 


16 — 


10 — 


24 


9 6 


13 6 




23 


17 — 


10 — 


31 


7 — 


— — 




30 


16 6 


9 6 


Aug. 7 


10 6 


— ~— 


Nov. 


6 


15 — 


9 — 


14 


13 — 


12 6 




13 


15 — 


8 — 


21 


16 — 


12 — 




20 


17 — 


S 3 


28 


17 — 


12 — 




27 


17 6 


7 1 


Sept. 4 


18 — 


11 — 


Dec. 


4 


17 6 


8 — 


U 


16 6 


11 — 




11 


IS — 


8 — 


IS 


16 6 


11 — 




18 


IS 6 


7 6 


25 


16 6 


10 6 











Lord Rhondda, in his remarkable paper, entitled "Coal 
Exports, 1850-1900," shows the quantitative relation ex- 
isting between coal exports and wheat imports, in the 
case of British India, by the following figures: 

Quantity of Wheat, etc. Quantity of Coal exported 

Year imported to United King-, from United Kingdom to 

dom from Elast Indies Indian Continent 

1995 440,000 tons 805,000 tons 

1896 106,000 tons 528,000 tons 

1897 27,000 tons 195,000 tons 

1898 477,000 tons 331,000 tons 

1899 410,000 tons 433,000 tons 

1900 100,000 tons 

To be sure, these figures are no longer applicable to 
present-day conditions in this particular market, but the 
principle remains the same. Coal is the great European 
return cargo, and it is in that sense that the British 
coal exports are looked upon as one of the three great 
principal factors which account for England's industrial 
strength and maritime prowess. 
Nature of American exports. — It is very important 



COAL— THE KEY TO THE CARRYING TRADE 241 

for America to grasp this economic significance of coal 
exports. For the increasing industrialization of trie 
United States is gradually changing the nature of our 
exports and imports, adding to the weight of the latter 
and reducing the weight of the former. Added to this is the 
fact that we have become the creditor nation of the world, 
which means that before very long our imports will exceed 
cur exports. As yet, the change has not been sufficient 
to make it seem advisable to add to our heavy exports of 
cotton, grain, lumber, etc., a volume of seaborne coal ex- 
ports in any way comparable with that of England. But while 
this is the general situation, our imports from South Amer- 
ica, Asia and Australia are growing in volume in excess 
of the weight of our exports to these countries. Coal ex- 
ports to these specific regions should therefore be encouraged 
in so far as the imports are tramp and not liner cargoes, for 
it should be remembered that manufactured commodities 
are not carried by the same class of vessels as are bulky 
raw materials. But one thing seems reasonably cer- 
tain, that the kind of coal export trade that is carried 
on at the present time between this country and Europe, 
which is of a ferry type, stands and falls with the high 
freight rates and abnormal coal prices of to-day which 
alone make a one-sided use of tonnage across the Atlan- 
tic a paying proposition. It should be viewed as a by- 
product of the abnormal economic situation at present 
prevailing in Europe. 

Future competition between England and America. — 
The joint effect of American competition and of the re- 
duced production of the British coal mines, which fell 
from 287.4 million tons in 1913 to 229 in 1919, has been 
that British coal exports have been reduced to less than 
half their pre-war size. There is no question but that 



242 OCEAN SHIPPING 

the decrease of the amount of coal available for export 
has been instrumental in accelerating the transition from 
coal to oil discussed in a previous chapter. This transi- 
tion is bound to have a lasting effect upon the coal trade 
situation throughout the world. But England will fight 
desperately to regain whatever portion of the world's 
market can be held by her consistently with econo- 
mic laws; for, "the sea is England's front door, back 
door and side door, and she will permit no menace to 
her safety thereon. She always has been and always 
must be ready to fight for it — war economic, war dip- 
lomatic or war military have no terrors for her, com- 
pared with even second place on the ocean. If oil sup- 
plants coal, she will get a sufficient oil supply or die 
tryingi; for an adequate fuel supply is to the British 
Empire one of the prime conditions of existence." ^ 

We dare not predict what the future will bring, but 
we offer the advice to every student of world shipping 
to keep his eyes fixed on approaching developments in 
the coal export situation here and abroad. Coal is indeed 
the key to the carrying trade. 

* R. E. Annin, Ocean Shipping, p. 91. 

REFERENCES 

Chamber of Shipping of the United Kingdom. Annual Reports 
1919-20 and 1920-21. 

Enney, E. D. American Coal in its Relation to our Foreign Trade, 
Address delivered before Seventh National Foreign Trade Con- 
vention. (1920). 

Jevons, W. St. The Coal Question, 3d edition. (1906). 

Liverpool Steamship Owners' Association. Annual Reports 
1919-20 and 1920-21. 

Thomas, D. A. (The late Lord Rhondda.) Coal Exports 18SO-1900 
in Journal of the Royal Statistical Society. (London, 1913). 

United Kingdom, Board of Trade. Report of Departmental Com- 



COAL— THE KEY TO THE CARRYING TRADE 243 

mittee appointed to consider the Position of the Coal Trade 

after the War. (London, 1918). 
United States. Department of the Interior, Bureau of Mines, 

United States Coals Available for Export. (1916). 

Department of Commerce. Foreign Markets for Coal. (Special 

Consular Report No. 69). (1915). 

Shipping Board. Fuel Stations of the World. (1919), 
ZiM HERMANN, E. W. "Die Britische Kohlenausfuhr; ihre Ge- 

sehichte, Organisation und Bedentung" in Gliickauf. (Essen, 

1911). 

Why America's Export Coal Business Should Be Built Up, Coal 

Age. Dec, 1920, and Jan., 1921. 



CHAPTER XIII 
CARGO HANDLING AND STOWAGE 
Reasons for American neglect of seaport equipment. — 

The direction in which the inventive genius of a people 
develops is determined by the surrounding economic 
conditions. In the case of this country, a surplus of 
tiatural resources, coupled with a shortage of labor, has 
been the determining factor, with the result that in the 
sphere of labor-saving devices, the American inventor 
has outdone all rivals. But, until recently, one field has 
been utterly neglected, and that is the handling of gen- 
eral cargo, both loading and unloading. 

The reasons for this apparent negligence are not hard 
to discover. America's face was turned to the moun- 
tains and the prairies, and her interest was absorbed by 
the development of fields, of mines, of railroads and of 
cities. Her foreign trade flourished because her exports 
sold themselves, being sorely needed by foreign buyers. 
Ocean shipping, and with it seaports, were neglected. 

Recent changes in the situation. — That situation has 
radically changed. America has become, as it were, 
over-night, the strongest rival of England, the "Mistress 
of the Seas." American exports are more and more 
changing their nature and destination in such a way as 
to make forceful salesmanship the necessary requisite 
of their successful distribution.. The marginal profit is 
reduced under the increasing pressure of foreign and 
domestic competition.. America's interest as an export- 
ing and a ship-owning nation now requires elimination 
of all avoidable waste motion ; and terminal handling, 

244 



CARGO HANDLING 245 

particularly cargo handling, is one of the sore spots — 
perhaps the worst — of our system as it has been handed 
down. 

The war has demonstrated the acuteness of the situa- 
tion by emphasizing our labor shortage, by necessitating 
greater speed and by increasing the volume of freight 
to be handled. The general rise of prices has added to 
the costliness of the old system. The recent labor 
shortage, due partly to diminished immigration, partly 
to diversion of dock laborers to other occupations, 
coupled with the increased cost of living, has resulted 
in an inflation of wages, reduction of working hours, 
and frequency of strikes unknown in pre-war days. 

The effect of American vessel ownership on the need 
of cargo handling equipment. — Besides these more or 
less general changes which offer powerful incentives 
for the invention and installation of mechanical cargo 
handling devices, two additional causes, purely maritime 
in nature, have contributed to the rapid change of atti- 
tude. Before the war a negligible portion of the foreign 
trade of this country was carried in American ships. As 
far as the general cargo was concerned, it was almost 
entirely transported by foreign vessels of the liner type. 
The result was that crews were hired abroad for the 
round trip. In order to keep the crew busy during their 
stay in American ports, the foreign shipowners preferred 
to discharge and load cargo by means of the ship's 
tackle, worked by the ship's crew. Therefore, the in- 
centive for the installation of mechanical cargo 'handling 
equipment in American ports was lacking. This, situa- 
tion has undergone a radical change. In the first place, 
the newly acquired American merchant marine is ab- 
sorbing a rapidly increasing share of our foreign trade. 



246 OCEAN SHIPPING 

The Seamen's Law accentuates this necessity. — Sec- 
ondly, the La Follette Seamen's Law is eliminating the 
necessity or desirability of keeping the crew of foreign 
vessels under pay during the stay in the American port. 
The details of this law will be more fully discussed in 
a later chapter. Here it may suffice to state in explana- 
tion of the aforesaid, that under the new law, desertions 
have been rendered considerably easier than they have 
been before. All this combined represents a powerful 
array of driving and beckoning forces in favor of the in- 
troduction of labor-saving devices. 

Opposition to mechanical installations. — But there are 
also forces working the other way. Every change meets 
with difficulties. No progress is possible which does 
not, at least temporarily, harm those whose interests are 
linked up with the old system which is to be changed. 
In this case the opposition comes from the longshore- 
men's and the stevedoring unions, who are afraid that 
the powerful position which they at present hold is en- 
dangered. It is an old story, as old as the history of 
mechanical devices in general. When we read that dock 
workers head the tractors unmanned towards the river 
while the foreman is not looking, we are reminded 'of 
the days when hand-weavers demolished the first power- 
loom. The argument that met the ill-judged opposition 
Df those eighteenth century laborers is the same as that 
which can be applied to-day. Any device that tends 
towards economy increases the salability of the com- 
modity produced, transported or handled, and increased 
salability, in the long run provides employment for more 
people than are temporarily deprived of work. This has 
become almost an axiom in economic science. But be- 



CARGO HANDLING 247 

sides indirectly enlarging the opportunity of employ- 
ment, mechanical handling devices, by substituting ma- 
chine power for muscular power, eliminate drudgery and 
excessive fatigue from the life of the dock laborer and 
convert the unskilled hand-laborer of to-day into a skilled 
mechanic of to-morrow. There is little doubt but that 
the common sense of the union leaders will see the point 
of these arguments and lead their followers in the right 
direction. 

Little need be said of the opposition raised by some 
conservative ocean shipping men, who believe that what 
was good enough for their fathers is also good enough 
for them. Nor will it be difficult to refute the argu- 
ments of those who say: "What is the use of our in- 
stalling new devices since the foreigner will not be slow 
to copy them?" For it happens that, in this case, some 
foreign nations, prompted by necessity, have for decades 
past studied the problems of mechanical cargo handling, 
and have consequently a good lead. 

Economy sought by mechanical handling. — The pur- 
pose of installing mechanical cargo handling devices is 
economy. This aim may be realized by reducing the 
actual cost of loading and unloading or by speeding up 
the process, thereby accelerating the turn-around of the 
vessel. A ship in port is a liability, involving hourly 
large losses through interest, depreciation, port charges, 
etc. The amount increases with the cost of the ship 
and the freight rates it can earn: Considering the in- 
terests of the general public, it will pay to install me- 
chanical cargo handling devices as long as the aggre- 
gate sum spent in handling the cargo, plus the a)bove 
mentioned expenses of the ship, are reduced. 



248 OCEAN SHIPPING 

That is the aim. The question is: By what method 
is this aim to be attaioed? To answer this it is neces- 
sary to analyze cargo handling* on the basis of : 

(1) The nature of the cargo to be handled. 

(2) The kind of movement to be performed. 

(3) The type of ship which is to be loaded or unloaded. 

Different cargoes require different handling devices. — 
From the standpoint of the handling problem ship cargo 
is divided into three classes: bulk commodities or spe- 
cialized freight, standard packages, and miscellaneous 
cargo. Bulk commodities are either of liquid form or 
■else consist of a more or less uniform mass of relatively 
•small pieces and are usually shipped in such quantities 
that entire ship capacities are filled. Typical bulk com- 
modities are : oil, molasses, grain, ore, saltpeter and coil. 
Standard package freight consists of bags of flour, cof- 
fee, sugar, rice, etc., or of bunches of bananas, or of 
crates of fruit and vegetables, of frozen carcasses, etc. 
Miscellaneous cargo hardly requires a definition. It is 
made up of the remaining freight not classified above. 

Handling movements analyzed. — The movements to 
be performed in liandling cargo may be divided into two 
main groups. In the first place, the actual transfer of 
the cargo from the ship to land, or from land to ship, 
must be considered ; secondly, the handling of the cargo 
on the pier or quay immediately before loading or after 
unloading. We shall confine ourselves almost exclu- 
sively to those movements which deal directly with the 
shipping end. The transfer movement itself may again 
be divided into lateral or low trajectory, and vertical or 

^ Our analysis is largely based upon R. S. MacElwee's Ports and 
Terminal Facilities, particularly Chapters X, XIII and XIV. 



CARGO HANDLING 249 

high trajectory, movements. The former is character- 
istic of loading or unloading cargoes from river and 
coastwise crafts which are equipped with side-ports, 
that is to say, openings on the s'de of the ship. We 
therefore speak of side-port transfer. Cargo may be 
handled through side-ports by unassisted man-power, by 
hand-trucks, conveyor systems or by means of the ship's 
tackle. The construction of ocean-going vessels does not 
permit of side-ports, except to a very limited extent, and 
the cargo handling takes place through hatches, which are 
openings in the decks. The modern tendency is towards 
making these hatches as wide as possible, in some cases 
having them extend clear across the ship. The hatch trans- 
fer requires vertical movements in addition to the more or 
less horizontal swing which takes the cargo from ship 
to land or from land to ship. 

Miscellaneous cargo offers greatest difficulty. — The 
mechanical devices whitfh are being installed must of 
necessity be adapted to these differences just described. 
By far the most difficult problem is offered by -the me- 
chanical handling of miscellaneous cargo. It stands to 
reason that the development of an apparatus capable of 
handling miscellaneous cargo of various weights, shapes 
and sizes, is necessarily a complicated business. As far 
as this country is concerned, the first mechanical devices 
for the handling of miscellaneous cargo were established 
in connection with coastwise and Great Lakes craft, 
that is to say, with the type of vessel which is equipped 
with side openings. Two machines have proved most 
successful in this field. One of these is the Reno Con- 
veyor of the Otis Elevator Company, which consists of 
a moving chain with lugs to engage the hand trucks 



250 OCEAN SHIPPING 

and haul them up the ramp.^ In this case the old sys- 
tem of manual operation is only slightly modified and 
yet it is claimed that savings amounting to from 15 to 
25 per cent, can be effected. A more radical improve- 
ment is obtained by the use of portable conveyors, 
usually of the continuous elevator conveyor type. The 
conveyor is simply a moving gang plank. The descrip- 
tion of the machine appears in "The Americas" and reads 
as follows: 

Loading and unloading through side openings. — "This 
machine has developed an efficiency little less than' mar- 
velous. The limit to the service it will perform is only 
bounded by the ability of the workers at the receiving 
end to feed the moving .belts, and of those at the de- 
livery end to receive the packages and stow them quickly 
and safely away in hold or warehouse. 

"This machine is entirely portable and lies out of 
the way until the time for use is at hand. It is then 
hoisted by the ship's derrick and placed in position in 
proximity to one of the hatches. If the ship is of mod- 
ern construction with large-sized hatches it can be low- 
ered directly into the hold. The land end of the con- 
trivance is then arranged where it can connect with 
whatever automatic receiving or delivering apparatus 
the pier or warehouse is equipped with, and operations 
start. When in operation it merely peeps over the edge 
of the hatchway and automatically discharges cargo 
placed in it on the pier, in the hold, or between decks, 
as desired. It occupies only a few square feet of hatch- 
way space and permits the ship's derrick to work on the 
heavier freight in the same hatch and at the same time. 

^ Owing to changes of tide and the seasonal variations of the 
water-level and rivers, freight from this type of craft does not al- 
ways move entirely horizontally. 



CARGO HANDLING 251 

"Careful accounts have been kept of the work of this 
sort of machine. It has been found that when work- 
men on piers become accustomed to its use and learn 
how to adjust it that it can be got ready for operation 
within twenty minutes after the ship ties up to the 
wharf. Where gravity conveyors were used to assist 
in feeding and taking away from the main machine, 
speeds of 1 ,500 deliveries of miscellaneous packages, 
boxes, barrels, and bags averaging in weight from 50 to 
150 pounds, were made per hour. This speed could be 
kept up for hours at a time, doubling at least the amount 
of work previously done in that time and reducing in a 
very marked manner the amount of breakage formerly 
chargeable to the old crane system for small packages. 
In this way incidental damage to shipments, which often 
ran into uncomfortably large sums, has been almost 
eliminated. 

"It is said that when operated in conjunction with 
modern crane hoists for the heavier freight the follow- 
ing advantages have been secured: 

(1) Speed of handling ship's cargo within its capacity 
can be increased from 25 to 75 per cent. 

(2) The amount of labor required can be appreciably 
reduced. 

(3) Economy of electric current consumption is ef- 
fected, most machines operating on 3 horse-power 
motors. 

(4) Damage to goods is practically eliminated."^ 

Methods adapted to ocean-going vessels. — More im- 
portant for our purpose is the problem of loading or 

1 The Americas, March, 1919. 



252 OCEAN SHIPPING 

unloading ocean-going vessels ; in other words, the prob- 
lem of the hatch transfer. Three distinct methods are 
recognized in modern practice. 

(1) By means of the ship's tackle without the assist- 
ance of mechanical equipment on land. 

(2) By means of the cargo-mast which permits of the 
joint operation of the ship's tackle and the wharf 
winch. 

(3) By means of cranes, sometimes supplemented by 
subsidiary apparatus on board ship. 

We have had occasion to point out that until recent 
years foreign ships, while frequently making use of 
cranes and other mechanical devices installed in Euro- 
pean ports, preferred to use their own loading and un- 
loading machinery. As a result, most of the cargo 
transfer in this country used to be accomplished by 
means of the ship's tackle. This is briefly described 
as follows : 

The work of the ship's tackle. — "All steamers other 
than tankers carry their own unloading machinery. Be- 
tween the two forward hatches is a short, stout mast 
with several movable booms, and another between the 
after-hatches. The modern freighter has as many as 
ten booms to a mast. Together with the donkey engine 
and tackle, loads of a ton or more may be handled by 
each boom and engine. 

"The cost of transferring freight by this tackle is not 
large, not over six or seven cents a ton on the average. 
This includes placing the cargo in the sling, lifting it 
out of the hold, and depositing it on the wharf lighter." ^ 

The work of the ship's tackle may be successfully 
supplemented by means of a cargo-mast erected on the 

1 Mac Elwee, op. cit., p. 153. 



CARGO HANDLING 2S3 

pier edge. The nature of this apparatus and of its work 
is described as follows: "A block and tackle with a 
line from a drum hoist on the pier to the hook is bur- 
toned to this girder. A ship's boom and hoist also oper- 
ate another line to the same hook, thus both the ship's 
tackle and the pier tackle work together. There are 
three movements. The load in the hold is attached to 
the hook; (1) the ship's winch raises the load; (2) the 
pier winch then starts to pull and the ship's hoist lets 
go; (3) the pier hoist then lowers the load. The move- 
ment made is without lost motion and by the shortest 
possible route." ' 

The equipment on land. — Equally as important as the 
mechanical equipment used in direct connection with 
the ship, is the equipment on land. Modern practice in 
building ocean terminals differs radically from that of 
the past. To-day the gantry crane is the unit around 
which all else seems to revolve. We quote once more 
from the above mentioned article which appeared in 
"The Americas" : "The crane has demonstrated itself to 
be the most economical, most flexible, and quickest of 
all machinery used in connection with the handling of 
general cargo. When the United States was suddenly 
called upon to equip ports in France with machinery by 
which a potential army of 4,000,000 American soldiers 
could be fed and munitioned, a gantry crane was chosen 
for the major share of the work." 

Late adoption of cranes explained. — We have pointed 
out one of the reasons why cranes were practically ab- 
sent from American ports, while in Europe they have 
been in successful operation for decades past. We have 
also pointed out why this situation is at present ma- 

Ubid. pp. 153, 154. 



254 OCEAN miPPlNG 

terially changed. But there are other reasons besides 
the preference of foreign shipowners for the use of their 
own tackle. 

American and European transportation conditions 
dififer essentially from each other. Especially on the 
continent, inland water transportation plays an impor- 
tant part. This means that as far as ocean-going ves- 
sels are concerned, a large amount of cargo is handled 
from and into river barges. These, however, because 
of their construction cannot be equipped with adequate 
unloading and loading devices, thus necessitating me- 
chanical devices on land. Also, European port construc- 
tion dififers materially from the American practice. The 
long, narrow pier is the characteristic feature of the 
American port. This, at least in its earlier form, does 
not provide sufficient room for the installation of semi- 
portable, or portable, gantry cranes. Also the question 
of port-ownership has a bearing upon this matter. A 
typical European port is municipally, or at least, pub- 
licly, owned, while many piers in American ports are 
owned or leased by private companies. Public owner- 
ship has the advantage over private ownership in this 
case, being able to distribute a larger amount of traffic 
over a given unit of quay frontage. This means that 
costly handling machinery is more apt to be economically 
utilized. But, apart from this, many European munici- 
palities are so impressed with the indirect advantages 
accruing from a large water-borne traffic within the con- 
fines of their particular port that they are often willing 
to incur expenses, even though at an apparent loss. It 
is interesting to note that because of the general use of 
cranes in European por's the rolling stock of the rail- 



CARGO HANDLING 255 

roads has been adapted to their use. That is to say, a 
large number of open cars are found. 

Cranes do not always pay. — Another point to be con- 
sidered is the fact that the installation of mechanical 
devices, particukrly cranes, does not pay unless the 
general cargo handling system has reached the point 
of efficiency which allows the crane to do its best. 

There is no use in installing cranes capable of handling 
miscellaneous cargo, at the rate of 250 tons or more an 
hour, if, owing to the lack of other facilities, the freight 
piles up in the transit shed or on the pier, causing con- 
gestion. As a rule, the crane pays best when it is used 
in connection with railroad facilities placed right along- 
side and with transit sheds provided with mechanical 
devices for tiering, conveying and elevating freight. All 
this goes to show that the question of crane installation 
is closely linked up with many factors of the transporta- 
tion system. 

Types of cranes. — Types of cranes may be distin- 
guished according to their construction, lifting capacity, 
range, and the power by which they operate. The oldest 
type is the steam crane, which was followed by the 
hydraulic. To-day, electricity is the kind of power most 
generally used. What most interests us here is the 
efficiency and economy of the crane. 

"As an example for the port of New York, it happened 
that portions of the waterfront of certain foreign cities 
had not been improved while other portions were, so 
that, as the whole ports were fully occupied by vessels, 
it was possible to compare the unequipped sections with 
the equipped under favorable conditions to determine 
their relative utilities. The following figures are from 
the tabulated results comparing the average of these 



256 OCEAN SHIPPING 

whole ports with those portions later equipped with 
machinery. It is easily deducted from these figures 
whait is possible at the port of New York. 

"These comparisons between the average transferring 
capacity per lineal- yard per annum at such ports are 
of instructive interest: 

Average of the whole Average of por- 

port per linear yard tion equipped 

Havre, France 38S tons 1,540 tons 

Rouen, France 483 tons ' 1,121 tons 

Marseilles, France 665 tons 1,694 tons 

"Not only can the above figures be attained at the 
port of New York, but, instead of 150 tons per linear 
foot, much better results, on account of improvements 
made in appliances since the above figures were tabti- 
lated." ^ 

Economies effected by cranes. — As to the saving ef- 
fected by the use of cranes, this is more difficult to 
calculate because it primarily consists in greater speed 
of cargo handling, the resulting reduction of the ship's 
idle time and the better utilization of pier or quay space. 
The following statement made by the same authority 
may be of interest: 

"With ten cranes 600 to 800 tons per hour can easily 
be attained, including the loading when full load capac- 
ity can be transferred. 

"In ten hours this would give 6,000 tons, and the 
vessel would be discharged and loaded in two days; 
9,000 tons have been unloaded in a similar time, but the 
above can be made the average. 

"That is, by such niachinery as is installed in every 

^ H. McL. Harding, Journal of Commerce, June 30th, 1917. 



CARGO HANDLING 257 

foreign commerce port of England, Germany, France or 
Holland, 6,000 tons transference per day are to be com- 
pared with the 1,500 tons at New Orleans. The ship's 
detentions will be one-third or one-fourth the time, and 
for the same berthing linear frontage four times as many 
ships can be berthed in a given period. The rental 
cost per ton would be one-fourth, and on a tonnage 
basis all the overhead charges would be also one- 
fourth." ' 

Handling standard package freight. — ^The same appli- 
ances which are capable of handling miscellaneous cargo 
may be applied to standard package freight. Here also 
the crane has amply demonstrated its usefulness. How- 
ever, because of the uniform nature of the cargo, the 
conveyor chain finds a wider field of application. A 
typical example is the banana unloading machine such 
as is found in New Orleans, Galveston and a number 
of other United States ports. These machines have an 
operation similar to that of a miscellaneous cargo un- 
loading. The bananas are carried on an endless belt 
which conveys thousands of bunches per hour without 
bruising or damage of any kind. These unloaders not 
only facilitate the quick turn-around of the ships, but 
enable the railroads to start the fruit north in refrig- 
erator cars a few hours after the arrival of the ship- 
ment. Similar devices are used to handle frozen meat, 
chiefly Australian mutton. 

Where the standard package freight is to be moved 
from ships to warehouses another innovation proves sat- 
isfactory, namely, the telpher, or overhead monorail 
truck. This equipment does not pay in connection with 
transit sheds, but has proved satisfactory in connection 



258 OCEAN SHIPPING 

« 

with the large quantities of sugar stored in the Chal- 
mette Sugar Refinery and with the municipal cotton 
warehouses at New Orleans. 

American efficiency in handling bulk commodities. — 
The highest point of eiiSciency, as reflected by speed 
and economy, has been reached in the case of the han- 
dling of bulk commodities. Here the United States 
leads, having established on the Great Lakes the world's 
record of mechanical loading and unloading of iron ore. 
The American oil industry was the pioneer in the han- 
dling of petroleum in bulk, and the coal-loading pier at 
Curtis Bay, Baltimore Harbor, is said to be most effi- 
cient in every respect. Also, as far as the handling of 
grain is concerned, this country is excelled by no other. 
It will be noticed that the experience of this country, 
the Great Lakes district excepted, has been primarily 
with the loading of bulk commodities. But ordinarily, 
loading and unloading go hand-in-hand; thus a grain 
ship is loaded by unloading a number of barges, and a 
steamer is bunkered in the same way. Furthermore, in- 
creasing ore imports from Cuba, Chile, Spain, etc., add 
to our experience in unloading. 

Loading coal and grain. — ^We take up the matter of 
loading first. Wherever possible gravity is used. At 
Lake Superior ports, the ore, which is moved in copper 
casts on "docks," meaning piers, is dumped through 
pockets into the ship's hold. In the case of coal two 
distinct processes must be noted, where It is exported 
in cargo lots. Coal is raised either by the conveyor belt 
or in railroad cars by means of hoists, or loading towers, 
and dumped into chutes leading into the ship's hold. 
The above-mentioned Baltimore coal pier has a coaling 



CARGO HANDLING 259 

capacity of from five to seven thousand tons per hour, 
dependent upon the character of the boats served. The 
topography of a harbor determines which particular 
method can be applied. The most efficient way of bunk- 
ering ships is by means of mechanical devices of which 
the bucket chain elevator seems the most efficient. Each 
unit is capable of delivering 125 tons per hour and as 
many as six units may be simultaneously attached to 
the side of a ship. 

The loading of grain was among the first operations 
to be handled on the principle of the continuous motion 
system. 

We quote the following account from "Ocean Freight 
Rates and the Conditions Affecting Them":^ 

"The method of loading grain in bulk requires little 
detailed description. The grain is carried by the ma- 
chinery of elevators to the elevator scales and thence 
through the hatchways into the hold. After a consider- 
able quantity of grain has been loaded, a number of 
men called trimmers go down into the hold and level 
off the grain. This process is called trimming. Ordi- 
narily the marine insurance companies require a cargo 
of bulk grain to be secured from shifting by means of 
heavy planks laid on top of the loose grain, layers of 
grain in sacks being stowed on the flooring thus made." 

Liquid cargo, such as oil, is loaded and unloaded by 
means of pumps. The unloading of solid freight such 
as coal and ore offers greater difficulties than the load- 
ing, but here also remarkable progress has been made 
by the introduction of the "grasshopper" unloader for 
ore and the application of the bucket chain conveyor to 
1 Frank Andrews, op. cit., p. 41. 



260 OCEAN SHIPPING 

the unloading of coal. Grain is of a semi-liquid nature 
as far as mechanical handling is concerned, and is suc- 
cessfully unloaded both by the bucket conveyor belt 
and by pneuma:tic, or suction, unloaders. 

Agencies in loading ships. — So far we have concen- 
trated our attention upon the material or mechanical phases 
of the problem of loading and unloading. Let us now 
consider the human side. Apart from the ship's agents, 
dock superintendents and other officials connected with 
shipping companies there are two main classes of men who 
figure in this branch of the shipping business — the steve- 
dores and longshoremen. According to T. R. Taylor,' the 
term "stevedore" is properly applied only to a "master 
stevedore," one who is capable of formulating and carrying 
out a plan of stowage of a vessel. He has to possess a 
wide knowledge of commodities, equipment and ships, he 
must be a good organizer and director of men. Three 
types of stevedores may be distinguished •} 

1. The contract stevedore, who is independent of steam,- 
ship companies and may take contracts to load or. un- 
load any ship. 

2. The limited contract stevedore, who will take contracts 
to handle only certain commodities, such as coal, graiii, 
or lumber, or who specializes in coastwise trade, local 
traffic, or sailing vessels. 

3. The shipping company stevedore or dock superinten- 
dent, who is engaged by a steamship company by the 
year to handle all its freight. 

1 Stowage of Ship Cargoes, Department of Commerce, Bureau of 
Foreign and Domestic Commerce, Miscellaneous Series No. 92, 
Washington, 1920. 

2 After C. B. Barnes, "The Longshoremen." 



CARGO HANDLING 261 

These types merge. Besides regular dock superinten- 
dents there are approximately sixty stevedores in New 
York who keenly compete for the cargoes arriving at or 
leaving from that port. 

The Longshoremen — The stevedores do their work 
through longshoremen whom they engage. Longshoremen 
are variously classified according to skill, specialties, func- 
tions, etc. The following classifications are given by 
Taylor.i 

1. Classification based on kinds of traffic. 

(a) Foreign or "deep-sea" freight; 

(b) Coastwise freight; 

(c) Harbor freight (the longshoremen who handle 
this freight are known as "shenanagoes" and are 
at the bottom of the ladder, while the "deep-sea" 
longshoremen are considered superior to those en- 
gaged in handling coastwise freight). 

2. Qassification based on commodities or kind 6f pack- 
ages: 

(a) Specialists in grain, sugar, lumber, oil, explosives, 
etc. 

(b) Longshoremen working on fruit-ships are known 
as "banana handlers or banana fiends." 

(c) Only a few longshoremen are considered capable 
of stowing barrels. 

3. Classification based on work performed, winchmen, 
drum-end men, gangway men, longshore sailors, etc. 

Stevedoring costs.— The contract on page 262 gives all 
the information desired regarding the method of calcu- 

1 Op. cit. p. 17. 



262 



OCEAN SHIPPING 



lating the expense of loading and unloading various car- 
goes.* 



Philadelphia, — 



Messrs. 



ol 



We hereby offer to discharse and/or load your Vessels at the port ol Phila- 
delphia at the undernoted rates, except when bound by charter, or m the case 
Ol strikes, lockouts, or other conditions beyond our control. 



DISCHABGING 

Bombay, Calcutta cargoes per 
Calcutta or Bombay ton.. 

per ton. . $0.56 

Bale car^o do. . . . 1.30 

China clay do 98 

Chalk do 98 

Colombo cargro do 76 

General cargoes (per ton 
weigrht or measurement) . . 

per ton. . 1.10 

Iron, piff do. . . . 1.15 

Lath do. . . . 1.50 

Ore do 75 

Steel or iron scrap. . .do. .. . 3.50 
Skins (wet), per ton of 3,340 

lbs., C. or B. cargo per ton. . 1.10 
Skins, il wet, quoted above, 
il dry on Bombay or Cal- 
cutta cargo basis. 

Sulphur per ton. . 1.00 

Wool: 

Compressed do. . . . 1.80 

Not compressed, per bale. . .60 
From River Plate ports: 

Maize and/or lin,seed, in 

bags overside, .per ton. . 1.10 
Maize "and/or linseed, in 
ba^'S on docks; Same 
rate plus labor lor truck- 
ing and piling, 

L0ADIN(} 

Ammunition and/or explo- 

Bives per ton. . $3..35 

Dynamite 50 per cent, extra. 

Automobiles per ton. . 

measurement 1.35 
Billets, bars, and pig iron . . 

per ton. . 1.51 
Beams (structural steel) .... 

per ton. . 2.85 
Barrel and/or drums ol oil, 
or other barrel cargoes: 
Full cargoes at refinery— 
From dock t23c. per bbl.) 

per ton.. 1.16 
From dock and lighters 

(27o. per bbl.) 

per ton 1.35 



IiOADINC! — continued 

Part cargoes (29c. per 

bbl.) per ton. . 1.45 

Out ol city (30c. per 

bbl.) per ton.. 1.50 

Barbed wire per ton. . $1.63 

Case oil: 

Full cargoes per case. . .04 

From lighters do 06 

Coil wire per ton. . 1,31 

Car material 

per ton measurement 1.31 

Carbon black do. . . . 1.31 

Cotton per ton. . 1.50 

Flour and other bagged cargo 

per ton. . 1.10 
General cargo (weight or meas- 
urement) per ton. . 1.10 

Hay do.... 1.60 

Ingots do ... . 1.51 

Iron, scrap do ... . 3.45 

Iron plates do ... . 1.80 

Locomotives and/or machinery 
or other heavy lilts, includ- 
ing crane hire, when loaded 
at Pier G and/or Eddystone, 
on the entire 



shipment, 
per ton . . 

...do 

. . . do . . . . 
. . .do. 



4.80 
1.50 
1.10 
1.10 
7.50 



Lumber 

Meats 

Oil cake 

Oats per 1,000 bushels. . 

Oats, filling into and stowing 
in bags and feeders, extra per 

1,000 bushels 19.00 

Oats, lull cargo, bagged, per 

1,000 bushels 34.00 

Pipe .- ' per ton . . 1.56 

Bails, under 40 ft. long and 

... .per ton. . 1.55 

ft. Ions aiid 

. . . .per ton. . 3.00 

do 1.50 

Tobacco do ... . 1.60 

Wheat and/or all heavy grains, 

per 1,400 bushels 5.50 

Filling and stowing in bags 
and feeders, extra per 

1,000 bushels 16.50 

Other commodities by special ar- 
rangements. 



rail equipment 
Bails, over 40 

rail .equipment 
Staves 



The foregoing rates are based on the usual custom ol Philadelphia delivery, 
and any expenses incurred for trucking, piling cargo, etc., on the dock to be 
paid for by the ship. (Over six [6] men to each gang on the dock.)- 

In event of our discharging or loading any vessels at lower rates than those 

1 From T. R. Taylor, op. cit. p. 91-2. 



CARGO HANDLING 



263 



named, we agree to give you the benefit ol such reduction, and in case ol 
increased cost ol labor, owners to pay such increase. 

We agree to give the ships the best possible dispatch and attention. Cargo 
in peaks, bridges, tanks, poops, lazarets, by day's work. ' 

We are covered by insurance against accidents which may occur to our 
men while employed by us to comply with the workmen's compensation act 
in the State ol Pennsylvania, lor whidi an additional 6 per cent, will be 
charged. 

Steamships to lumish all necessary steam, winches, runners, and slings lor 
working the cargo. The stevedores lurnishing the men to work at the winches, 
the ship paying the prevailing rates lor the commodity handled lor each man 
so lurnished. Should steamers' winches not be available, owners to pay the 
cost ol hoisting charges. 

Should men be employed by the ship to assist in any work, such men to be 
paid the prevailing rates lor the commodities handled, 

liABOR RATES. 



Day 
work. 



Over- 
time. 



Meal 
hour. 



Over- 
time. 



Heal 
hour. 



General cargo per hour. . 

Foreman, general cargo do ... . 

Oil. in city , do. . , . 

Foreman, oil do ... . 

Grain do ... . 

Foreman, grain do ... . 



$0.85 
1.35 
1.00 
1.50 
.95 
1.45 



$1.30 
2.05 
1.50 
3.25 
1.40 
2.15 



$1.70 
2.70 
2.00 
3.00 
1.90 
2.90 



$0.50 
.70 
.55 
.75 
.50 
.70 



$0,85 
1.56 
1.00 
1.50 
,95 
1.45 



Oil. Point Breeze and Gibsons Point: 

$11.50 per day or one-hall day. 

$15.50 per day or one-hall day or night or one-hall night overtime. 

$2.30 per hour meal hour. 
Foreman ; 

$15.00 per day or one-hall day. 

$22.50 per day or one-hall day or night or one-hall night overtime. 

$3.00 per hour meal hour. 
Explosives ; 

$12.50 per day or one-hall day. 

$10.00 per day or one hall day or night or one-halt night overtime. 

$2.50 per hour meal hour. 

Overtime, $1.00 per hour; $2.60 per hour meal hour. 
Foreman: 

$18.00 per day or one-hall day. 

$25.00 per day or one -hall day or night or one-hall night overtime. 

$3.60 per hocr meal hour. 
Overtime, $1.50 per hour; $3.50 per hour meal hour. 

The basic day is from 8 a. m. till 5 p. m. (eight hours). All other time is 
overtime, and the rate lor all labor lor overtime is governed by thei National 
Adjustment Commission. ■ . . .,, 

This agreement to commence on . and to remain in lorce until 

, 19— . 

Witness : 



(Signed) 



, to do the 



We hereby accept the above offer ol Messrs. - — - — - — — — , .„ „„ ..~ 

stevedoring work (except when bound by charter) ol all steamers under our 
management, and subject to all conditions named in this contract. 



., this 



(Signed) 
day 0,1 . 19- 



264 OCEAN SHIPPING 

The problem of stowing. — In the case of bulk com- 
modities the- question of stowage, i.e., proper distri- 
bution, and fastening of the cargo in the ship hold 
is a relatively simple one. But stowing a cargo of gen- 
eral freight is nothing short of an art. It requires care- 
ful planning, which in the stevedore's language is called 
"stowing the S'hip on paper." "The work is a good 
deal like making the pattern for an old-fashioned dis- 
sected puzzle map. When the pattern is made, the 
traffic man's job is to fit the actual pieces of the puzzle 
together — every piece must fit exactly into its appointed 
place, and each piece must be at hand when wanted, or 
the whole job- is delayed." ^ It is easy to see why the 
problem is complicated. Imagine a steamer loading 150 
diflFerent commodities all of different size, shape, packed 
in different ways, possessing different qualities, destined 
to different ports. Unless the cargo is distributed ac- 
cording to a preconceived plan carefully worked out 
with due consideration to all factors which enter into 
the matter, the safety of ship and cargo is jeopardized 
and delay in unloading is unavoidable. 

The paper on which the stevedore and the traffic man 
lay their plans is called the "Cargo Stowage Plan." We 
reproduce on page 265 the kind which is used by the United 
States Shipping Board. The original is large enough to pro- 
vide sufficient space in the vessel outline for the various 
items of cargo to be stowed. In the case of very large 
freighters carrying an exceptionally wide range of com- 
modities, several drawings are necessary to assure clarity. 

1 R. E. Annitt, Ocean Shipping, p. 149. 



CARGO HANDLING 



265 




; 5 




CO 




■4 








0), 




X 


i 


T3 


?o 


Z 


o 


o 


o 


i 


V) 

H 


g 


i 


s 


> 


§ 


o 
PI 


1 g 


^ 


o 




f "* 


^ 


f ? 


^ 



266 



OCEAN SHIPPING 



The stowage plan itself is based upon the informa- 
tion contained in the so-called "Proposed Loading Re- 
port." An actual example will convey all desired in- 
formation : 



PROPOSED LOADING REPORT." 



Oargo to be loaded bi and upon tbe 6. S. Helen Angier 

BalJlog JaDuary 20, 1920, for Genoa, Italy. 

Total Dead Wetglit 7,300 torn 

Less: 1 

Fuel J,000toas 

Water 200 tons j 

Btorcs 100 toDS J 

Total 6,000 tona 



... !,• 



,300 tons 



Di-.te, Dec. SOtli, 10ia 
Voyage Ka a. 

Cubic Capacity (Bale) 330,000 feet 

Less cubic deducted tfor extra tuel, 

crew, quarters, etc, 

Less 10 per cent Broken Stowage 33,000 feet 

Total 297.000 TppI 



Broker 


Sblpper 


Packages 


Commodity" 


Total 
Weigbt 


Mcas-t 
Cubic 
Feet 


Permit 


Delivery neiflnl 


Weigbt 


Cubic 


L.ftU. 


Soivanus Export Co. 
.'lowanus Export Co. 
IT. S. Steel Co. 
Am. Marh.v. Co. 
Standard Oil Co, 
Seggennan Bros. 
Am. Trading Co. 
T. O. Sealy 
Pacific Trading Co. - 
Lamborji & Co. 
Robinson &. Cull 
Nestle'a Food Co. 
Various 


16 M 
2 Cars 

lOHBags 
3,700 Cs. 


Boards ... ^ ....... . 


20 
30 

1,000 
800 
500 

1,500 
200 
200 
800 
500 
100 
100 
250 


12.000 
56,000 
30,000 
75.000 
24,000 
12,000 
28,000 
25,000 
15.000 
5,000 
15,000 


V 
V 

V 

1/ 

V 


1,000 

500 
1,500 

200 
.SOO 
500 

100 




CaldweU 

Direct 

^ard 


Steel Billets , 

Macbluery i 

on ■ 


1,400 


D. 4G, 

NicholB 


Salt Meats , 

Bale Leather i 

Turpentine 


COO 


Harslller 




DaviesT.ftCo. 






DaviesT.ftCo. 
A, J. M. 
Tarlona 


Automobiles » 

Condensed Milk ... 


375 










6,000 


297,000 


4.600 


+2,75« 
7J60 



« Rate per foot 

* Details Immaterial In pro-forma. 

* Annin, Ocean Shipping, p. 156 



It is impossible to lay down hard and fast rules which 
must be followed in planning the loading of a general 
cargo. But, in general, cargo which is to be unloaded 
first should be on top, provided it is not too heavy. 
Odor, danger of explosion, leakage, etc., have to be con- 
sidered, as well as the effect upon the stability of the 
ship. The diagram on page 267 is a facsimile of a stowage 
plan properly filled out. 

Other aspects of this problem of general cargo will 
be considered in the Chapter on "Rate Practice and 
Rate Control." 



CARGO HANDLING 



267 




268 OCEAN SHIPPING 

REFERENCES 

Andrews, F. Ocean Freight Rates and the Conditions Affecting 

Them. Published by the United States Department of Agri- 
culture, Bureau of Statistics. (1907). 
Barnes, C. B. The Longshoremen. Published by the Russell Sage 

Foundation. (1915.) 
HiLLcoAT, C. H. Notes on Stowage of Ships (London, 1918). 
Hough, B. O. Ocean Traffic and Trade. Chap. IV. (191S). 
MacElwee, R. S. Ports and Terminal Facilities. Chaps. X, XIII 

and XIV. (1919). 
MacElwee and Taylor. Wharf Management and Stevedoring 

(1921). 
Material Handling, Machinery Manufacturers' Association. 

Various Publications. 
National City Bank of New York. Various articles published in 

the Americas. 
Stevens, R. W. On the Stowage of Ships and Their Cargoes 

(London, 1894). 
United States Department of Commerce, Bureau of Foreign and 

Domestic Commerce, Stowage of Ship Cargoes, by T. R. 

Taylor (Miscellaneous Series, No. 92). 1920. 
War Trade Board, Bureau of Research. Stowage of Ship Cargoes. 

1919. 



PART V 
SHIPPING SERVICES 



269 



CHAPTER XIV 



STEAMSHIP SERVICES AND VESSEL TYPES 

Classification of carriers on the basis of service. — The 
variety of services which in the course of time have 
come to be required of the ocean carrier has led to a 
number of more or less sharply distinguished vessel 
types. In its extreme form this distinction manifests 
itself in marked differences in ship construction. But, 
at times, it is merely a matter of the differences of use 
to which the ships are put. The classification of steam- 
ships is a fairly close parallel to the corresponding 
classification in railroad transportation. The following 
tabular comparison will make this clear: 

CLASSIFICATION OF CARRIERS ON BASIS OF SERVICE 

Ocean Transportation 
Slow cargo steamer 

a. Run on schedule (cargo 
liner) 

b. Not run on schedule 
(tramp) 

Express freight line (Lucken- 
Line) 

Combination freight and pas- 
senger liner. 
a. Primarily freight 
ib. Half and half 

c. Primarily passengers 

4. Passenger train (carrying 4. Passenger liners (carrying ■ 
mail and express) mail and express) 

a. Ordinary passenger train a. With emphasis on speed 

b. Fast through trains b. With emphasis on luyury 

271 



Rail Transportation 
1. Slow freight train 



2. Fast freight train 



2. 



3. Freight and passenger train 3. 
(milk train) 



272 



OCEAN SHIPPING 



The extent to which this division, on the basis of 
service or operating method, is reflected in the construc- 
tion of the different types of ships appears from the 
following figures : 



VESSEL 



Gross 
Tonnage 



Net 
Tonnage 



Dead 
Weight 
Capacity 



Average 
Speed 
at Sea 
(Knots) 



Indicated 
H. P. 



Tramp' 

FreigM-cttirying Liner 

Andrea T, Luckenbach 
Combination Vessels 

*'Breslau" 

"Minnewaska" 

"George Washington". , . 
Express Steamers 

"Mount Vernon" 

"Bismarck'" 

"Mauretania" 



4,665 

10,797 

7,524.09 
14,317 
25,569.85 

19,503.22 

56,000 

31,550 



2,930 

8,309 

4,807.86 
8,878 
15,378.74 

6,584.44 
24,000 
9,145 



7,800 

15,700 

8,600 
15,000 
13,300 

8,300 

15.000 

1,500 



lOH 
13 

12»A 

15 

19}i 

23K 

25 

25 



2,500 
3,600 

'ii.'oob" ' 

45,000 
90,000 
68,000 



'Typical tramp, computed from latest available figures, by Engineer's Society of 
Northern England. 

'Approximate figures. 

Tramps and liners; their numerical relation. — No 
exact statistics are available to show the numerical re- 
lation of the different classes. The only reliable esti- 
mate refers to British shipping before the war, and di- 
vides the entire tonnage of that country between the 
regular liners with scheduled sailings which trade along 
defined routes, and tramp steamers which trade wher- 
ever they scent a cargo. That distinction between tramp 
and liner is the grand division into which all shipping 
falls. But in view of the fact that .there is a large amount 
of "loose" tonnage .capable of supplementing the liner's 
sailings and prepared for trade at short notice to any 
part of the world, it is impossible to draw a sharp line 
of distinction and to arrive at an exact numerical divi- 
sion even between the two types. The only available 



STEAMSHIP SERVICES AND VESSEL TYPES 111 

index of th* importance of tramp tonnage is that af- 
forded by the speed of the vessel. Practically all the 
ships capable of maintaining a speed of twelve or more 
knots an hour belong to the "liner" type. Before the 
war they represented 35 per cent, of the British mer- 
chant marine. To these should be added a number of 
slower vessels. It was, therefore, estimated roughly 
that of the total British tonnage before the war 60 per 
cent, consisted of "tramps" and 40 per cent, of "liners." 
This relation is only slightly altered when expressed 
in numbers. In 1913 the number of British vessels of 
over 1,000 tons net was 3,675. These are the ships that 
count in the overseas trade. Of these, about 1,200 were 
liners and the rest tramps. Of the liners, again, one- 
half were at that time certified as foreign-going pas- 
senger ships. This would give the following classifica- 
tion for British ocean-going shipping in 1913: 

1. Tramps 2,400 

2. Cargo liners 600 

3. Passenger liners 600 

The world's steam tonnage before the war is esti- 
mated at 25,000 vessels. Of these, not more than 1,600, 
or about 7 per cent., were classed as purely passenger 
or combination passenger and freight steamers. When 
we wish to apply the British tramp percentage of 60 
to the world in general, it must be remembered that, 
for reasons that will be .given belpw, England predom- 
inated in the possession of that particular type of ves- 
sel. In other words, the world average for 1913 would 
undoubtedly be below the British figures, probably con- 
siderably less than one-half. This world average, how- 
ever, was considerably increased when this country 



274 OCEAN SHIPPING 

added to the world's merchant marines the enormous 
fleets of fabricated ships, all of which are of the tramp 
type. 

Service of tramp and liner compared. — Kiphng con- 
veys a good idea of the contrast between liners and 
tramps when he writes:^ 

"The Liner she's a lady, and 'er route is cut and dried; 

"But, oh, the little cargo-boats that 'aven't any man, 
"They've got to do their business first, and make the most they 
can !" 

Others have referred to the tramps as "gypsies," or 
as "the truck horses of the sea." They do the dirty 
work of the ocean, which fact is sufficiently reflected 
in their unkfetnpt appearance. 

"More often than not the appearance of the craft 
substantiates its generic name. It recalls the nomad 
of our highways, being ill-kempt and even at times re- 
pulsive in its appearance. Possibly the paint has been 
battered from its hull by wind and wave, until one is 
unable to imagine its appearance at the time it left the 
builder's yard. Its original garb has been superseded 
by a red rust applied with Father Neptune's brush — 
salt spray. The deck looks woe-begone, while the en- 
gines rattle like shot in a tin can. Yet the vessel is 
as tight as. the glistening lordly liner moored nearby, 
and the chances are that when at sea, with the ele- 
ments raging in torment, the insignificant, disreputable- 
looking tramp is the better seaboat of the two." ^ But, 
as always, exceptions prove the rule. 

The functions of this ubiquitous craft are described 

1 Rudyard Kiph'ng, The Liner She's a Lady, 1894. 
= See Talbot, op. cit., pp. 203, 204. 



STEAMSHIP SERVICES AND VESSEL TYPES 275 

by Sir Walter Runicman, M.P., well known in British 
shipping circles, as follows: 

"The 'tramp' goes everywhere, competes for every- 
thing against everybody, cuts into any trade — ^British, 
foreign or colonial — whenever he can see a profit, and 
he is similarly subject to attack with no means of de- 
fense except his own efficiency." 

Peculiarities of tramp construction. — The typical 
tramp differs radically in its construction from the pas- 
senger liner, or even the cargo liner. It is built with a 
view to economy — not speed — in such a way as to fit 
it to as many trades and cargoes as possible. This end 
is obtained by giving it as high a block coefficient as 
is consistent with the principles of naval construction. 
A "block coefficient" or "coefficient of fineness" is a 
ratio of the actual contents of the submerged portion 
of the vessel's hull to the contents of the parallelopiped 
of the same length, breadth, and depth. In the case 
of express liners this ratio is as low as .6, for racing 
yachts even .4, but the full-shaped slow freighter reaches 
a "block coefficient" as high as .82. To make this tech- 
nical point a little clearer we might say that if we were 
carving the model of a tramp out of a box-shaped block 
of wood, we would have to cut away only 18 per cent, 
of the wood, wihile, in the case of a liner from 1/3 to 
2/5 of the wood would have to be removed. The tramp 
has a flat bottom and the keel is inside, rather than 
outside, the line of the hull, enabling the ship to store 
freight in every spot of deck space. 

This rather clumsy appearance, while conducive to a 
high cargo carrying capacity, makes a speed of over 
11 J^ to 12 knots an hour undesirable. On the other 
hand, from 9 to 10 knots are the minimum required to 



276 OCEAN SHIPPING 

assure safe navigation under severe weather conditions. 
As was pointed out before, the improvement of the 
marine engine permits of a gradual increase of speed 
without additional fuel cost. The tendency, therefore, 
is for newly built tramp ships to be capable of a some- 
what higher speed than the older types. 

British predominance in tramp shipping. — British 
maritime supremacy, before the war, was largely due 
to her predominant position in the ownership of tramp 
steamers. It is true that if the tramp owners of the 
world were to meet in common assembly, almost every 
nationality would be represented, but the British would 
have a secure majority. It is an interesting study to 
analyze the reasons for Great Britain's distinct prefer- 
ence for this type of vessel. 

From the standpoint of national psychology the Brit- 
isher possesses two pronounced traits: extreme individ- 
ualism and sportsmanship. To own a tramp entails 
much less loss of individual liberty than does the pos- 
session of even a controlling share of a large shipping 
corporation, such as the steamship lines of to-day tend 
to be. At the same time, the operation of a tramp is 
a more risky business, involving a larger amount of 
aleatory element. That is why it appeals to the sports- 
man. Thus, tramp-owning has become a tradition in 
many English families. Moreover, British bankers have 
accumulated a larger fund of experience in gauging the 
financial risk incurred in tramp operations and, conse- 
quently, are more liberal with their credits. 

Then there is the economic side which, of necessity, 
makes England the greatest employer of tramps. The 
bulk of both her exports and her imports requires tramp 
tonnage. We have seen that three-fourths by weight 



STEAMSHIP SERVICES AND VESSEL TYPES 277 

of the British exports consist of coal, and coal is the 
natural cargo for tramps. If for no other reason, Great 
Britain, because of her position in the coal trade, would 
be 'the biggest tramp owner in the world. But, also 
her imports of grain, cotton, ore, etc., necessitate the 
use of this economical carrier. 

What tramps carry. — ^This brings us to the question 
of what tramps carry. We may say, in general, that 
all goods which are transported in such quantities that 
a ship can be hired or chartered for the purpose of 
carrying them, are the natural cargo for tramps. This 
means, primarily, bulk commodities such as grain from 
the Black Sea, Argentina, Canada, United States and 
'India; ore from Spain, Cuba, Chile, and Sweden; tim- 
ber and coitton from Gulf ports; nitrate from Chile; 
soya beans from Manchuria, also clay and sugar and, above 
all, coal. 

But tramp cargo does not of necessity have to con- 
sist of bulky raw materials; if a manufacturer has to 
ship enough heavy goods such as steel rails, locomo- 
tives, agricultural machinery, etc., to fill a ship, he 
almost invariably charters a tramp. The seasonal con- 
centration of their shipments makes the International 
Harvester Company a typical example of this case. The 
United States Steel Product Company, a subsidiary for 
foreign trade, of the United States Steel Corporation, 
because of its exceptional volume of business, is also 
occasionally in the charter market for a tramp or two. 

On the other hand, not all bulky commodities are ex- 
clusively transported by tramps (as grain, oil, etc.). In 
a previous chapter we referred to the practice of liners 
taking parcel lots of grain to fill their "distress space." 
As a rule the liner, because of good profits from the 



278 OCEAN SHIPPING 

passenger and general freight business, can successfully 
compete with the tramp by undercutting their rate. This 
is particularly true of the lines serving New York, which 
enjcy the benefit of well-balanced outbound and inbound 
flow of commodities. Even coal, under certain circum- 
stances, may be carried by cargo liners. More expensive 
bulk commodities such as rubber, tin and even wool gen- 
erally prefer the liner. 

Besides grain, an increasing number of other bulk 
commodities are either deserting the tramp or, because 
of their nature, are unfit to be carried in any vessel that 
is not especially constructed for them. That is par- 
ticularly true of such commodities as fuel oil, lubri- 
cants, cocoanut, cottonseed, soya bean, other edible oils,' 
and molasses. 

Economies of the tramp. — But, for a large variety of 
bulk commodities, more especially of the cheaper class, 
the tramp is indispensable because of the low price at 
which it can offer its services. This cheapness is based 
upon 'the economy of construction, operation and man- 
agement of the tramp vessel. We have seen that the 
tramp is built with a view to maximum carrying capac- 
ity, not for comfort or speed. Because of the low ini- 
tial cost of construction, the tramp can lead a leisurely 
life and does not have to rush back and forth like our 
ocean grey-hounds, every hour of whose idleness means 
a loss of large sums in interest and depreciation. The 
low speed of the tramp is his greatest economy, as far 
as operation is concerned. It means less coal per horse- 
power hour and more space for cargo. Additional econ- 
omy of operating results from the absence of a definite 
schedule, such as binds the liner to her hard and fast 
route. The liner must start as nearly as possible on the 



STEAMSHIP SERVICES AND VESSEL TYPES 279 

stroke of the hour advertised, cargo or no cargo. The 
tramp is free from such expensive obligations. Besides, 
the tramp may save in port charges by applying to ports 
less expensively equipped than those frequented by the 
large liners. Finally, the tramp saves management ex- 
penses. He does not require advertising; his owner does 
not need to make a dazzling display with attractive office 
buildings, nor does he have to own expensive piers and 
other terminal facilities. 

The tramp losing ground. — In spite of these econ- 
mies, the tramp is losing ground. For a number of years 
preceding the war there have been tendencies towards: 

(1) The gradual conversion of tramps into regular 
liners. 

(2) Successful competition of an established line 
where tramps have succeeded in opening up a 
more or less regular trade. 

(3) The absorption of tramp vessels by regular liners.^ 

We are not referring here to the practice of "keeping 
the tramp on the beat," which has always been done 
when the facilities at the disposal of the line concerned 
were insufficient to cope with the "peak load" at the 
height of the season or on the crest of a prosperity wave. 
That is simply a temporary expedient which has its 
counterpart in the practice of "sending a liner tramping." 
This is done only in the case of the lowest type of line 
vessels, the pure cargo liner, and of the most respectable 
of the tramps. 

This interchangeability is nothing new. But besides 
this, the increasing regularity of trade between points 

1 See Report of British Committee Appointed by Board of Trade, 
op. cit. 



280 OCEAN SHIPPING 

where, formerly, only an occasional connection was es- 
tablished, has led to a permanent encroachment by the 
liner upon the tramp domain. Modern marketing meth- 
ods, in many lines, are based upon such punctuality and 
reliability of foreign shipments as only liners can assure. 
Furthermore, the tendency of the times is towards com- 
bination and concentration. This frequently leads to 
absorption of tramp tonnage by large companies owning 
regular liners. Finally, we must not forget the effect 
which the present transition from coal to oil is bound 
to have upon tramp operation. It will restrict overseas 
transportation of coal and thus curtail one of the tramp's 
most important duties. 

To acknowledge the existence of these tendencies 
does not, however, imply any prophecy as to the com- 
plete disappearance of the tramp. 

Two qualities serve as a guarantee, not only for the 
continued usefulness of this type of vessel, but also 
assure it a wide field of activity. These qualities are 
cheapness and flexibility. The tramp is the chosen in- 
strument for the transportation of seasonal bulk traffic. 
That includes most cereals and fibres. It does not pay 
to build up a line service for seasonal trade. Seasonal 
changes do not fit into schedules ; they necessitate flexi- 
bility on the part of the carrier, and that is the tramp's 
strongest side. To the extent that the coal trade pro- 
vides merely the return freight for these seasonal com- 
modity movements, that important branch of world 
shipping will continue to be the mainstay and salvation 
of the tramp owner. 

The cargo liner. — The cargo liner, as we have seen, 
does not necessarily have to be a different type of ves- 
sel from the tramp. It may simply be a difference in 



STEAMSHIP SERVICES AND VESSEL TYPES 281 

ship use, not in ship types. But the modern tendency- 
is toward the construction of vessels best suited to the 
particular use to which they are to be put. Mr. Ros- 
seter, at one time Director of Operations of the Shipping 
Board, commented ^ upon this point as follows : 

The Chairman. — What is the liner-class cargo ship? 

Mr. Rosseter. — A ship with a large steamship radius, and special 
facilities for handling a variety of cargo, according to the trade or 
service. In the Philippine service it is very desirable to have some 
cool chambers for tobacco, a product of those islands. In other 
services, on account of reverse of seasons, it is important to have 
refrigerator space for fruits and other perishable cargo. In many 
of the trades which we are developing, while passenger service is 
very important, it is secondary to cargo, but both features should 
be there, which means limited passenger accommodations on large 
and speedy cargo ships called "liners." 

The Chairman. — Are they of any particular size? 

Mr. Rosseter. — Yes, sir. They might be generally described as 
between ten and fourteen thousand tons deadweight. 

The Chairman. — What speed? 

Mr. Rosseter. — It is a moot question whether they should be 14, 
but, in any case, not less than 13 knots. Our cargo ships are close 
to if not actually below 9 knots. 

Special types of cargo steamers. — This tendency to- 
wards specialization is following two distinct directions. 
On the one hand, we have to do with the adaptation to 
specific cargo; on the other hand, with the adjustment 
to climate and traffic conditions prevailing on the par- 
ticular route which the vessel is to cover. In its extreme 
form, the adaptation to the cargo has led to the devel- 
opment of the tanker or the refrigerator ship. But we 
do not have to confine ourselves to such cases where 

1 See Hearings before the Senate Committee on Commerce and 
Establishment of an American Merchant Marine, pp. 1953, 1954. 



282 OCEAN SHIPPING 

the nature of the cargo demands an entirely new type 
of vessel. We refer here to the development of such 
types as the turret steamer, the trunk steamer and the 
self-trimming vessel. All of these vessels are ibuilt to 
carry loose cargo, such as ore or grain, which are apt 
to cause difficulties in rough weather by shifting from 
one side to the other. Incidentally, it may be mentioned 
that the turret vessel with its narrow turret deck and 
rounded harbor deck was originally built mainly for 
the purpose of evading the measurement rules of Great 
Britain.^ 

The first turret steamer was built at Sunderland in 
1892. The type proved very popular until the British 
measurement rules were changed to meet the evasion 
tonnage box. Trunk steamers derive their name from 
the trunk erection which is about seven feet high and 
half the width of the upper deck on which it is located. 
The self-trimming feature usually consists simply of a 
clear hold arranged in such a way that the cargo, by its 
own weight, distributes itself evenly throughout the 
hold, filling all corners. Ships which are intended to 
carry heavy commodities such as ore are sometimes con- 
structed so as to overcome the difficulties arising from 
the stability excess. Owing to the low factor of ore 
it takes a load filling only a small part of the space 
available to weigh the ship down to her mark. To 
meet these difficulties a ship type has been developed, 

1 At the Nautical Marine Exposition held in New York in April, 
1920, there was exhibited the model of an "Ischang Junk" which 
is at the same time the Qiinese prototype of both the turret deck 
ship and the tank vessel. The turret deck serves the double purpose 
of evading the tax on salt water carriers by the junks and of pro- 
viding protection against spilling. (See Nautical Gazette, April 24, 
1920, p. 631.) 



STEAMSHIP SERVICES AND VESSEL TYPES 283 

biiilt on the cantilever principle, which is described as 
follows : 

"This type has been constructed for trades where 
either the outward or the homeward trip has to be 
made in ballast owing to lack of cargo. For instance, 
the United Kingdom takes very much more in bulk 
and weight from the United States than she sends there ; 
the consequence is that some ships have to cross the 
Atlantic in ballast; the ordinary ballast tanks formed 
by the double bottom of a ship are not sufficient when 
crossing a stormy ocean. A steamer drawing but little 
water will in heavy weather run the risk of breaking 
her shaft or losing her propeller, owing to the propeller 
racing clear of the sea when the ship is pitching heavily. 

"The cantilever principle of construction provides the 
extra ballast necessary for such voyages, this being 
stored in wing tanks which run fore and aft on each 
side of the ship right under the main deck, and extend- 
ing from the ship's side to the line of the hatch coam- 
ings. They thus form two great box-girders which add 
considerably to the ship's strength both transversely and 
longitudinally. So great is the additional strength that 
hold-pillars, beams and web frames are not needed, and 
thus the hold is perfectly clear for storage purposes. 
Very long and wide hatchways can be arranged for in 
vessels built on this principle; and as the tanks are not 
included in tonnage measurement, steamers can be built 
on this method which will carry three tons deadweight 
to every net register ton."^ 

Profit-earning capacity of cargo liners. — ^The loss of 
available cargo space is somewhat neutralized by the 
fact that the ballast tanks, extending all the way up 

iKirkaldy, op. cit, p. 111. 



284 OCEAN SHIPPING 

the side of. the ship, are exempted from measurement. 
Such an arrangement is particularly advisable in cases 
where one-half the round-tnip has to be covered in bal- 
last. With this we have touched upon the second type 
of vessel adaptation, namely, adaptation to peculiarities 
of specific trade routes. 

In view of the expense necessarily involved in con- 
structing specific types, the question of paying value is 
an important one. As a rule, these ships pay only in 
such cases where steady, all-year-round employment is 
guaranteed. It is not surprising to find, therefore, that 
most of these special cargo carriers are owned by firms 
which, at the same time, control the cargo, such as the 
tank fleets of the oil companies, the molasses tankers 
of the sugar refiners, the "Cubore" fleet of the Bethlehem 
Steel Corporation, and the self-trimming colliers of cer- 
tain exporters and importers. But the modern cargo 
liner also, acting as a common carrier, tends to be' some- 
what differently constructed from the all-embracing 
tramp. The , specialty of the cargo liner is not bulk 
cargo but general freight. To reduce the stay in port 
to its minimum, cargo handling equipment and open 
hatches are provided. The following description of the 
"Andrea F. Luckenbach" will give an idea of an up-to- 
date cargo liner. 

A typical modem cargo liner. — The "Andrea F. Luck- 
enbach" is one of a fleet of nine American express freight 
twin-screw steamers, ranging from 11,500 tons dead- 
weight to 14,000 tons, the latest of which are exclu- 
sively oil-burning vessels driven by geared turbines ca- 
pable of sustaining a speed of 13 knots an hour. The 
oil-carrying capacity of the "Andrea F. Luckenbach," 
in her double bottoms and service tanks, is 3,000 tons, 



STEAMSHIP SERVICES AND VESSEL TYPES 285 

while the daily consumption does not exceed 47 tons, 
giving a cruising capacity of over 6 days. The "Andrea 
F. Luckenbach" measures 8,309 net registered tons, 
10,797 gross registered tons, and has actually carried 
as much as 15,700 tons of cargo. Because of her ex- 
cellent cargo handling equipment and open hatches, 
twelve gangs of men can load or unload 4,5Q0 tons in 
ten hours. The holds are equipped with electric blowers 
to keep lard or similar cargo cool. 

REFERENCES 

Annin, R. E, Ocean Shipping. Chaps. (1920). 

Crammond, E. The British Shipping Industry. (1917). 

Hough, B. O. Ocean Traffic and Trade. Chaps. I, II, V, VI. (1915). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XL (1919). 

KiRKALDY, A. W. British Shipping. Book 11. (1914). 

Smith, J. R. The Ocean Carrier. (1908). 

Industrial and Commercial Geography. Part II. Chaps. I and II. 
(1913). 

Talbot, F. A. Steamship Conquest of the Sea. Chap. XV. (1912). 

United Kingdom. Board of Trade. Reports of Committee ap- 
pointed to consider the Position of the Shipping and Shipbuild- 
ing Industries after the war. (London, 1918). 

United States. Commissioner of Corporations. Transportation by 
Water in the United States. Part I. Chap. III. (1909). 
Senate Committee on Commerce. Hearings relative to the 
Establishment of an American Merchant Marine. (1919-1920). 



CHAPTER XV 
PAPERS AND DOCUMENTS 

Importance of charter party. — ^The various freight 
services performed by shipping companies can best be 
explained by going over the various papers and docu- 
ments used. Just as the freight business itself is divided 
into tramp and liner business, so also the papers divide 
themselves along these lines. In view of the fact that, 
as yet, a large quantity of goods is carried by tramp 
ships, the "charter parties," that is, the documents which 
form the contracts between the ship's owner, or his 
agent, and the charterer, the man who leases the ship, 
are, in a way, the most important documents in the 
shipping business. The term is derived from the Latin, 
"charta partita," so-called because in the olden days the 
contract was divided, or parted, into two halves, one 
being kept by the vessel owner, the other by the 
charterer. 

Trip and time charter. — There are two general kinds 
of .charter parties, the trip charter and the time charter. 
As the name implies, in the former case, the ship is leased 
for a voyage, either single or round-trip, the route is 
specified, although usually allowing for certain modifica- 
tions. Where a time charter is used, the vessel comes into 
the possession of the charterer for a stipulated period of 
time, the usual arrangement being that the owner of the 
ship supplies the crew, their food and maintenance, and 
keeps the ship in repair, while the charterer furnishes 
the fuel and pays the port and terminal charges. Under 

286 



PAPERS AND DOCUMENTS 287 

the terms of the trip charter, the owner operates his 
vessel and remains in possession of it. In this case the 
charge which the charterer has to pay is based upon the 
unit of cargo carried; that is, a ton, bushel, quarter, or 
hundred pounds, as the case may be. Time charter rates, 
on the other hand, are based upon the deadweight ton. 
Trip charters are much more common, as time chartering 
places a greater risk upon the charterer than the ex- 
perienced shipper, under ordinary circumstances, is 
willing to take upon himself. 

Robert Edwards Annin in his book "Ocean Shipping" 
distinguishes four main classes into which nearly all 
charter parties may be divided : 

(1) The Bare-Boat form. — ^This is comparable to 
"the lease, for a given period, of an unfurnished 
house, the tenant paying all expenses and de- 
fraying the cost of insurance and repair." 

(2) The time charter, — (Explained above.) "It may 
be likened to the leasing of a furnished house 
where general service is supplied by the land- 
lord." 

(3) The net form charter. — ^This is a trip charter, 
the ship being hired for a given voyage. Under 
this form, the operating expenses go to the 
owner, the voyage and cargo expenses to the 
charterer. "The net form charter resembles a 
hotel on the European plan, where space, heat, 
light and service can be had for a longer or 
shorter period on fixed terms, and everything 
else is charged as an extra." 



288 OCEAN SHIPPING 

(4) The gross form charter. — "Here the owner 
pays all regular expenses. This is like an 
American plan hotel where the guest pays a 
given rate a day, which includes everything 
except breakage and a few incidentals." 

Charter parties vary according to the peculiarities of 
trade and are influenced by customs and usage prevailing 
in certain sections of the world. The usual development 
has been toward increasing uniformity. Trade organiza- 
tions such as the Chamber of Shipping of the United 
Kingdom, the Baltic and White Sea Conference,^ the New 
York Produce Exchange, etc. have worked out model 
charter parties which, through the adoption by the 
majority of the members of these bodies, have become 
the norm for specific trades. The following are a steamer 
and a sailing ship charter. 



United States and Australasia 
Steamship Company 

8-10 BRIDGE STREET 

CUASTBR PARTY HBW YOKE— AOSTKAI.ASM 

, New York 192. . . 

IT IS THIS DAT MUTUALLY AGREED between 

ol , Owners of the British Steamship 

ol classed 100-A 1 of 

the measurement of Tons Net Begister having Tons Per- 
manent Bunkers, having 'tween decks laid and being provided with water ballast 
if required, able to steam at the rate of not less than ten knots per hour at 

sea fully loaded now and the 

UNITED STATES & AUSTRALASIA STEAMSHIP COMPANY OF NEW YORK, 
as Charterers of the said vessel as follows: 

1. That the said Steamship shall proceed with all speed to NEW 
YORK (or Baltimore if so ordered under Clause 25), and as conditions 
precedent, being tight, staunch and strong, and classed as above, and 




1 See Appendix C. 



PAPERS AND DOCUMENTS 289 

in every way fltted and in order for the voyag-e, shall in compliance 

_ . with orders griven to Captain, upon application to Charterers (the 

oso steamer having- all holds and hatchways ready and g-ear rig:g:ed for 

R5 taking: in Carg-o), proceed to a loading berth or berths at the appointed 

''^ pier, and/or in such dock as Charterers may direct (and/or in the 

«o River, if required by Charterers), and there take on board all such 

.§ IS Cargo as the said Charterers or their Agents shall tender (in'cluding any 

u Deck Cargo, at Shippers' risk, and Live Stock), the Charterers having 

•- ^ the full reach of the Vessel's Holds, Decks, and all extra spaces avail- 

*.*» able for cargo from Stem to Stern. 

^■^ 2. The owners guarantee that the Steamer shall be able to carry 

•< ^ a dead weight of not less than tons of Cargo, exclusive 

^ a of tons of coal for the voyage when leaving Port of Load- 

.* a ing, which Owners shall take for their own account in permanent and/or 
^■S temporary bunkers and/or on deck; and that they will place at Chart- 
erers' disposal not less than cubic feet of grain hold space, 

exclusive of peaks, alley ways, and other spaces. The sadd apace is to 
be moEisured off from deck or ceiling to top of beams and skin of ship, 
and said dead weight capacity and available space to be mutually agreed 
in writing before lay days commence. All bunkers, temporary or per- 
, manent, shall be fixed and filled, and all coal for the voyage shall be on 
J. . board before lay days commence. The Owners to remove all movable 
3 : stanchions, ladders, and wooden bulkheads required by Charterers. 



g 



3. Upon receipt of despatches, &c. (for the preparation of which 
Charterers shall be allowed 24 hours after completion of loading, Sun- 
days and holidays excepted), the Steamer shall proceed at her best speed 
and with all possible despatch to ports in Australasia at Charterers' 
option as per Clause 5. discharging at each port, at the Wharf or 
Wharves appointed by the Charterers' Agents, the Cargo for that port 
in the usual and customary manner agreeable to Bills of Lading, and 
so end the voyage. Discharging ports to be in geographical order. 
Where the term Australia is used in this agreement it is understood to. 
include Tasmania. 

4. Cargo to be brought to and taken from alongside Ship as cus- 
tomary at Merchants' risk and expense. 

5. Freigrht to be a lump sum say: — 

£ if Steamer discharges at ports in 

Australia not west of Melbourne via Panama- 
Canal. 

£ if Steamer discharges at ports in 

New Zealand and ports in Aus- 
tralia not west of Melbourne via Panama 
Canal. 

£ if Steamer discharges at ports in 

Australia. 



^^ To be paid in New York as follows: 

^"K ONE-THIRD (1/3) less 3^^ per cent, to cover interest and Insurance 

^ S with demurra&e at loading port, if any, to be advanced 10 days after 

Q *■ final depaj-ture of the steamer from United States, Bills of Lading, as 

«■« presented by Charterers having- been duly signed; ONE-THIRD (1/3) 

■2 in New York two months after sailing of steamer without discount. 

£e and the BALANCE after right and true delivery of the cargo in Aus- 

6 tf tralia and/or New Zealand less 2 % per cent, commission. Any Freight 

^ I which may be payable by Bills of Lading at ports of discharge, not ex- 

^ ceeding- the said balance, to be accepted by Owners as part payment of 

"^* said balance without recourse to Charterers. The owners to pay all 

nort charges pilotages, canal dues, and all customary charges paid by 

Steamers and to pay Charterers an address commission of 2% per 

^nt on 'the amount of Freight. Dead Freight, ^nd, Pemurra6:e. to be 

dpdn'cted trom th© first payment of Freight, 



290 OCEAN SHIPPING 

6. The Freig-ht under this Charter is based on the above giiarantea 
by the Owners (Clause 3) as to dead weight and space, and it is agreed 
that a pro rata reduction is to be made for any shortag'e in welgrht or 
spa«e. All spaces tendered in fulfillment of guarajitee in Clause 2 
must be suitable for the carriag'e of ordinary General Carg^o and such as 
will permit of issuingr under deck bills of lading- and must have a clear 
entrance for Carg-o measuring- not less than four feet by threb feet. 
In the event of peaks being: tendered in fulfillment of space euM-anteed 
as per Clause 3 only one-half of the meastu'ement thereof shall count. 

7. Charterers* liability under this Charter to cease on payment of 
aforesaid Advance Preiffht, except that they shall remain responsible for 
demurrag-e in loading* and for such portion of the Chartered Freigrht on 
the Carg:o delivered as shall be in excess of the total amount of Freight 
reserved by the Bills of Lading upon the Cargo shipped. 

8. Steamer to be consigned to Charterers or their Agents at Ports of 
Loading upon the usual terms — say twenty Guineas and Cash for 
Steamer's disbursements, if required, shall be advanced at customary 
rate of exchange by Charterers, subject to a commission of 2%% 
thereon, and the amount of disbursements so advanced may be deducted 
out of the Advance Freight. The vessel to be subject to all usual 
Custom' House and other charges, and to pay advertising and other 
usual expenses as customary with Steamers loading on the berth, and 
all commissions and charges under this Charter-Party may be deducted 
from the Freight. Steamer to pay usual Wharfage at the loading pier. 

9. Charterers to have option of ordering Steamer to three additional 
Ports of Discharge as above, paying £100 extra Freight for each 
additional Port so used, and if Steamer discharges at less than the 
number of Ports specified, as per Clause 5, a reduction in Freight to 
be made at the same rate for each Port saved. If Steamer) discharges 
in New Zealand, Charterers have the option of ordering Steamer to 
proceed first either to the most northern or to the most southern 
Port, but the subsequent Ports to be taken always in geographical 
order. If, at any Port, Steamer is ordered to discharge at more than 
one Wharf, Charterers to pay any additional expense of shifting. 

10. Charterers to have the option of cancelling this Charter-Party 
should the Steamer not be in all respects ready at her loading berth be- 
fore noon 

11 , .working days (Sundays and holidE^a 

excepted are to be allowed the said ChMi;erers for sending the Cargo 
alongside the Steamer; the said days to be computed from noon — but 
not less than twelve hours (Sundays and holidays excepted) — after the 
Captain has lodged written notice at the Charterer's office that the 
vessel is at her loading berth with coals on board for the voyage, and 
being in all respects ready as per Charter-Party, but not before the 

Such notice to be given between the hours 

of 10 a. m. and 5 p. m., but not after 1 p. m. on Saturdays. Overtime 
to be at Owners' expense. Gunpowder, Ammunition, and/or explosives, 
to be taken on board in the River in the customary manner without 
counting time so occupied as lay days. Magazine if reqiiired, to be 
provided by Charterers. 

12. Demurrage to be paid at the rate of Pounds per 

running day, and pro rata for parts of a day and despatch money to- 
be paid at the same rate per running day saved and pro rata for parts 
of a day. Charterers to have option of Ten (10) extra lay days, Sun- 
days Emd holidays excepted, at one-half ( ^ ) demurrage rate. 

13. Charterers shall not be responsible if the ship be detained by 
Strikes, or Lock-out of Workmen, Ice, Bain, or Fog, or any other 
cause whatsoever beyond Charterer's control and they shall not be 
responsible if Shippers are prevented from sending or getting Cargo 
alongside, or if any delay or hindrance occurs in the loading by 
reason of Frosts. Floods, Bad Weather, Political Disturbances, Riots, 
or accidents, and any time the Steamer may be delayed from such 
causes shall not count as lay days. 



PAPERS AND DOCUMENTS 2^1 

14. The diseharg-e of the Steamer in Ports abroad is to be according" 
to the custom of the Ports, and at the risk of the Owners, both as to 
time and method of discharg:ing: and the Charterers are not to be sub- 
ject to demurrage at dischareringr ports for any cause whatsoever. 

15. Charterers or their Agent to nominate the Stevedores at Ports 
of Loading and discharge, and owners agree to employ the same under 
a penalty of £100 for each port, for breach of this condition, the 
Ship paying forty cents per ton at Ports of Loading, and current rates 
at ports of discharge. Loading, Stowing and Discharging of Cargo are 
to be entirely at Owner's risk and the Stevedores being under the di- 
rection of the Master, the Owners are responsible for improper stowage 
or other consequences. Steamer to give use of Steam Winches and 
provide Coals, Donkeyman and Winc^men, els required. Any extra 
expense necessary for loading, stowing and/or discharging pieces over 
Jive tons weight shall be paid by Charterers. 

16. The Master or Owner to attend daily, or when requested, at the 
Charterer's or Agent's Office to sign Bills of Lading as presented and as 
customary, and at any rate of Freight, without prejudice or reference 
to this Charter, but Charterers, or their Agents, are hereby authorized 
to sign Bills of Lading on behalf of the Master and Owners, in accord- 
ance with Tally Clerks' returns. Tally Clerks at Owner's expense shall 
be nominated by Charterers to measure and take a correct account of 
the Cargo as received; this account shall be binding on the Owners, and 
a copy thereof, with measurements, shall be handed to the Charterers 
as required by them. 

17. Dunnage and Mats as required to be provided by the Owners, at 
their ext)ense. and the Steamer before completion of loading, or when 
required by Charterers, to have water ballast tanks empty to satisfac- 
tion of Charterers. 

18. The Owners agree to hold Charterers and their Agents free of, 
and indemnified against, claims arising from desertion, illness or leav- 
ing behind of crew or other persons or for loss or damage to or over- 
carriage or wrong delivery of cargo arising through the act. neglect, or 
default of Captain, Officers or crew, or from any cause whatever after 
the goods have been delivered to the Steamer; and for Customs Duties 
levied by Colonial authorities in respect of manifested goods not landed 
or of pillaged goods, or in respect of any claims for goods which are 
manifested and not delivered in good order and condition, also fori any 
fines, penalties, claims or liabilities incurred or for which either of 
them may be held responsible arising out of or connected with restric- 
tions imposed by the Australian. New Zealand or other Government, 
with. regard to Asiatics or other aliens on board the Steamer; also to 
provide Charterers and their Agents with funds for the settlement of 
all claims arising as set out in this clause and/or for the ship's ordinary 
disbiu'sements . 

19. Steamer is to hoist the Line flag of the Charterers, and funnel to 
be painted as required by Charterers at Owner's expense. 

20. The Vessel to be consigned at Ports of Discharge to Agents ap- 
pointed by Charterers, whom the Master and Owners hereby agree to 
accept as the Agents of the Vessel at the respective ports, upon the 
usual terms — say. twenty Guineas at each Port, and the usual charge 
(or fee) for Customs work, 

21 The Act of God. Perils of the Sea. Fire, Barratry of the Master 
and Crew. Enemies. Pirates, and Bobbers. Arrests and Restraints of 
Princes. Rulers and People, and others. Accidents of Navigation ex- 
cepted* Strandings. Collisions, and all Losses and Damages caused there- 
by are' also excepted, even when occasioned by negligence, default, or 
error in judgment of the Pilot, Master. Mariners or other servants of 
the Shipowners: but nothing herein contaijied shall exempt the Ship- 
owners from liability to pay for damage to Cargo occasioned by bad 
stowage by improper or insufficient dunnage or ventilation, or by im- 
oroper opening of valves, sluices and ports, or by causes other than 
those above excepted: and all the above exceptions are conditional on 
the Vessel being sep-worthy when she sails on the voyage, but any 



292 OCEAN SHIPPING 

latent defects in the machinery shall not l>e considered unseaworthiness, 
provided the same do not result from want of- due dilig-ence- of the 
Owners or any of them, or by the Ship's Husband or Manag'er. Owners 
agrree to hold Ghartereis indemnified in so far as the said Negrligence 
Clause may be contrary to the laws of the United States, and to accept 
the usual Line form of Bill of Lading- as customary in this Trade. 
with the conditions therein, and the same to form part of this Ag'ree- 
ment. 

22. The Steamer has liberty to call en route at any Port or Ports 
(but not in South Africa) for Coal, to sail without Pilot, to tow and 
be towed, and assist Vessels in all situations. 

23. Averagre (if any) to be settled according: to York-Antwerp Rules, 
18S0 and Antwerp Rule. 1903. 

24. Penalty for non-performanc« of this Agreement, the estimated 
amount of damagres, 

26. Charterers have the option of ordering the steamer to load 
part cargo at Baltimore, steamer afterwards completing loading at New 
York, or of ordering steamer to complete loading at Baltimore after 
loading part cargo at New York. Should Charterers avail themselves 
of this option, they are to pay Owners an additional lump sum freight 
of Two Hundred Pounds (£200), and all above conditions of Charter 
Party are to apply both to loading at Baltimore and New York. Time 
occupied in shifting ports not to count as lay days. This option to be 
declared by the Charterers on written application by Owners two days 

before the steamer leaves 

or if ordered to Baltimore from New York, two days before completion 
of loading at New York. 



Witness to the signature of 
Witness to the signature of 




CW$ CbdrtCr Pfllly,, made tod concluded at New York the day o! 



19....,.„., oetween ^ Aeeot, 

ior^ and on bebalf of , . _Owners of the Ship, or veiael 

*^'«'*^ — »«' ^toD8, or thereabouts, 

Xcsister.oieasurenieDt, ^araateed to cany^ ^__-i-_,___toii9 deadweight of cargo, 

- and now -^ - , . - ■ 



«ndthe UNITeO STATES 4 AUSTRALASIA STEAMSHIP COMPANY OF NCW YORK, u 

Charterers ol the said vessel as follows 

1. That the said vessel, guaranteed by the Owners to be in a sound 
and seaworthy condition, shall be kept tight, staunch, well fitted, 
tackled, and provided with every requisite, and with men and provisions 
necessary for such a voyag-e aa hereinafter mentioned, shall with all 
convenient speed proceed to New York, and there at such proper berth, 
in such dock and/or in the river as ordered by Charterers, receive and 
take on board, a full and complete cargo of lawful merchandise, and 
being so loaded shall therewith proceed with all possible dispatch to 
Fremantle and/or Adelaide and/or Melbourne and/or Sydney and/or 
Brisbane as ordered on signing Bills-of -Lading, but not more than two 
ports of discharge in all. 



PAPERS AND DOCUMENTS 293 

2. That the whole of said vessel under deck from stem to stem, 
including^ the poop and compartments, shall be at the sole use and 
disposal of the Charterers during: the voyagre aforesaid, "with the ex- 
ception of the necessary and usual accommodations for the master, 
officers and crew, and also room for the stowag'e of sails, cables, provi- 
sions. water, etc.. for the ship's company for this voyag-e, which shall 

..g not exceed the bulk of tons of 40 cubic feet. 

g Vessel to receive all such lawful goods and merchandise as the Char- 
■5 terers or their agents may think proper to ship, and that no other 
• g:oods or merchandise whatever shall be laden on board, nor passen- 
^ g^ers taken, otherwise than from the Cliarterera or their agrents, without 
*3 their written consent. 

g2§ 3. In case, prior to loading:, vessel should meet with accident and/ or 

■•^.^ 5 be in such condition that underwriters decline to insure cargo at cus- 

v^^** tomary rates for the intended voyag'e. Charterers shall have the option 

'*' of cancelling or maintaining this charter. 

4. Vessel to haul to loading berth, or berths, designated by Charterers 
at her own expense; but if required to move more than once, Charterers 
are to pay the towage, and further that when loaded, cleared at Customs 
and Charterers' papers have been delivered to master, the vessel is to 
proceed to sea within forty-eight hours, wind and weather permitting, 
or p^ Charterers full demurrage, at a rate as hereafter stated. 

o Q : 5. The owners, at their risk and expense to employ, in loading at 

§5 - New York, stevedore named by Charterers (but to be under direction 

^ e, : and control of the master of the ship), at the rate of 

cents per ton, also to employ the necessary clerks, to be nominated by 
Charterers, to take account of and to measure cargo at not exceeding 
current rates. 

S§ • 6. Vessel to discharge at any wharf, or place where she can safely 

' get, designated by Charterers' Agents, commencing twenty-four hours 
after berthing, and notice in writing given, and to continue with cus- 
tomary dispatch in accordance with the regulations of the port; ship 

^. ■ to work overtime if required by Charterers or their agents at port of 

o w ^ loading and/or discharging; if at any port vessel is ordered to discharge 

j;^ ; at more than one place Charterers to pay cost of Shifting. Vessel to 

o 3 ■ employ stevedore appointed by Charterers' Agents at port of discharge, 

'5 -, • but the charge not to exceed that of oth^r equally reliable stevedores. 

•2 S ' Any movable beams, stanchions or ports, to be removed and replaced 

S ? * at ship's expense, if required by Charterers. Proper dunnage and shingle 

S h • ballast for the voyage to be provided by the vessel, and only the quan- 

V I • tity necessary for the safety with the cargo furnished to be retained on 

- • board. 



^■« 



7. The Charterers engage to pay to the owners, or their agent, for 
the charter or freight of the said vessel for the voyage aforesaid, the 
lump sum of $ 



in full of all port charges, pilotages and other expenses as customary: 
Charterers have option of ordering vessel to disoharge at one port only, 

in which case freight will be reduced by $ Ports 

to ba in geographical order and sufficient cargo to be left on board to 
enable vessel to sail in safety to her final port of discharge. 

8 Payment thereof to be made in New York as follows: At least 
one-third, five days after dispatch and final departure of the vessel from 
New York in cash, less five per cent, discount, and any balance by Bills- 
of-Lading bearing freight payable abroad and/or in cash, at Charterers' 
option after right delivery of the cargo at final port of discharge. 

9 Charterers' responsibility to cea^ie when cargo is all on board, and 
bills of lading signed, ship having a lien on cargo for all freight, dead 
Ireight and demurrage. 



294 OCEAN SHIPPING 

10. The master to sign Bills-of-Ladings for the cargo as presented at 
any rate oi freight without prejudice to this Charter Party, and for this 
purpose to attend at the Charterers' office daily, or oftener if reauired. 
After the vessel has been dispatched the Charterers may sign Bills-of- 
Lading as agents for and on behalf of the master and owners, they 
guaranteeing same to be made out in accordance with the mates receipts 
and/or Records. Such Bills-of -Lading to be of like effect at port of 
discharge as if signed by the master. 

11. The owners to pay to the Charterers* order when and where re- 
quired an address commission of 2% per cent, on total amount of 
freight, dead freight and demurrage under this charter. Ship to be con- 
signed to Charterers' or their agents at port of loading and (inwards 
only) at port of disdiarge, paying them the usual Customs and Agency 
fees. 

12. Charterers shall be allowed for the loading of the vessel lay days 

as follows, that is to say: working days for loading, (Sundays 

and holidays excepted) commencing at New York, twenty-four hours 
after ship hauls to loading berth, with ballast on board and levelled. 

and ready to receive cargo, but not before 

One additional working day to be allowed Charterers to clear the vessel 
at the Custom House (and if necessary to put in cargo,) which is not 
to be counted as a lay day. Charterers ' to have the option of five addi- 
tional lay days for loading under this charter at $ per 

day used. 

13. In case the vessel is longer detained than the lay days herein 
provided for, the Charterers agree to pay demurrage at the rate of 

$ per day, day by day, for every day so detained 

(Sundays and holidays excepted), provided such detention shall happen 
by default of the Charterers or their agents, and for lay days not used, 
and allowance of one-third of demurrage to be made to Charterers. 

14. The cargo shall be received and delivered within reach of the 
ship's tackles at the ports of loading and discharging. Should lighter- 
age be necessaiy, only sufficient cargo to be discharged to enable vessel 
to proceed to place or wharf designated by Charterers' Agents, and there 
complete' her discharge, such lighterag'e to be at risk and expense of 
the cargo. * 

15. If required by Charterers (vessel being ready), she is to haul to 
berth for loading, without prejudice to the time of commencement of 
lay days, Charterers paying ship's wharfage for any excess of d^s in 
berth over and above those stipulated for m the charter. 

16. Charterers shall not be responsible if the ship be detained by 
strikes, or lock-out of workmen, ice, rain, or fog, or any other cause 
whatsoever beyond (Charterer's control, and they shall not be responsible 
if shippers are prevented from sending or getting cargo alongside, or if 
any delay or hindrance occurs in the loading by reason of frosts, floods, 
bad weather, political disturbances, riots or accidents, and any time 
the ship may be delayed from such causes shall n.ot count as lay days. 

17. If any cargo should fail to be delivered at destination or lost 
by excepted perils, or sold short of destination on account of damage. 
including risk of fire during the voyage or whilst cargo is in course of 
discharge, a reduction shall be made from the amount due under the 
charter, such reduction to be in the same proportion to the total sum 
due the vessel as such short delivered cargo bears to the whole cargo 
on board. 

IS. It is also mutually agreed that this charter is subject to all the 
terms and provisions of, and all the exemptions from liability con- 
tained in the Act of Congress of the United States, approved on the 13th 
d^ of February. 1893, and entitled, "An Act relating to Navigation of 
vessels, etc." This charter is subject to the rules of the New York 
Produce Exchange including strikes. Vessel to haul to Oilyard if ordered 
by Charterers, and to clear at New York Custom House in their name. 
Average, if any, according to York/ Antwerp Rules of 1890, ajid Ant- 
werp Rule 1903, 



PAPERS AND DOCUMENTS 29S 

19. Charterers to have the option of cancelling this Charter-Party 
ehould the vessel not be in all respects ready at her loading berth before 

noon on 

20. The act of God; restraints of rulers, princes or peoples: enemies: 
Ipss or damage from fire on board, in hulk or craft, or' on shore ; col- 
lisions; any act, neglect or default whatsoever of Pilots, Master or crew 
in the navigation of the ship, in the ordinary course of the voyag'e: and 
all and every the dangers and accidents of the seas and rivers, and of 
navigation of whatever nature or kind excepted. 

21. Penalty for non-performance of this agreement estimated amount 
of freight. 

22. Vessel to be loaded under supervision of the Board of Under- 
writers of New York. 

Witness to the signature of 

Witness to the signature of 

Important clauses explained. — It would lead us too far 
to analyze in detail the various clauses which are con- 
tained in modern charter parties; however, attention is 
directed to a number of more important items appearing 
again and again in charter parties. In the first place, the 
term "lay days" should be explained. It refers to the 
time allowed to the charterer for either loading or un- 
loading, sometimes both, but usually to the number of 
days allowed for loading. "Lay days" are calculated 
either in "running days," that is, consecutive days, or in 
"working days," that is, such days as are usually devoted 
to work at the place where the vessel is loaded. Usually 
the demurrage allowance is made to compensate the 
owner for the loss of wages, insurance provision, etc., 
incurred because of the delays in loading. On the other 
hand, the charterer may receive "despatch money" in 
case he is able to load within less than the stipulated 
number of "lay days." We reproduce here two charter 
parties, one used for steamships, the other for sailing 
vessels. These documents may serve as an illustration 
of the details of the transaction. 

Terms used in the charter business. — The British 



296 OCEAN SHIPPING 

weekly shipping journal, Fair play, has published a list 
and full explanation of abbreviations used in connection 
with the charter business, the most important of which 
are given below. 

IMPORTANT ABBREVIATIONS COMMONLY USED IN 
CHARTER BUSINESS 

C.f.o. — Cork for orders. 

o.c. — open charter. 

d.b — Deals and boards. 

d.b.b. — deals, boards and battens. 

cp.d. — charterers paying dues. 

s.p.d. — shipowners paying dues. 

C.f.o. (Cork for orders)' implies that the vessel is on charter, as, 
for instance, C.f.o. 3s. 3d. means that, if the boat is ordered to pro- 
ceed to Cork for orders to discharge at a port in the U.K. Cont., 
she gets 3s. 3d if ordered from there to a U.K. port, 10 per cent, 
additional if to a Continental port, but if ordered direct from load- 
ing port to U.K. there is 3d. reduction (3s.), and if to the Cont. no 
reduction (3s. 6d.). This form of charter is very seldom used, and 
after the war it will probably become extinct, if it is not already so. 

n.c. (new charter) refers to the new charters in the Black Sea, 
Azoff, and Danube trades, and implies amongst other things that 
the vessel has to call at Gibraltar for orders to discharge at a port 
between Hamburg and Havre both inclusive ; 9d. per unit additional 
if ordered to the Continent ; 9d. less if ordered to the Bristol Chan- 
nel; and Is. additional if ordered from Gibraltar to a Channel port 
of call. 

"Northern range" refers to the Atlantic U.S. ports, as follows: 
New York, Philadelphia, Baltimore, Newport News, Norfolk. 

In United States grain freights the small, figures are per quarter. 
The "net" freight is per ton of 20 cwt. on the quantity of heavy 
grain carried, or on the guaranteed deadweight of the steamer. 
The net register basis provides for the payment on the net register 
tonnage of the vessel. 

"b.d." (bar draft) implies that the vessel is chartered or berthed 
to load as much cargo inside the bar as she can safely cross the bar 



PAPERS AND DOCUMENTS 297 

without lightening (the balance of cargo being supplied at a given 
rate of freight at another port). In the Plate trade the expression 
"less 2s." or "less 3s." implies that the vessel gets full freight for 
the amount of cargo she carries over the bar, and 2s. or 3s. reduction 
upon what is shipped at the lower ports. 

Cotton from U.S. Jhis is carried either on the n.r. basis [see 
above]or on the lb. basis, the freight per latter being quoted in frac- 
tions (of a penny), thus Galveston to Liverpool 17/64ths (of a 
penny), or so much per 100 lbs., namely, for instance, 30 cents per 
100 lbs. 

In the U.S. grain freights, either on "berth terms" or on the C.f.o. 
basis, the quotations, unless otherwise stipulated, are for heavy grain 
of 480 lbs. per qr., and if for oats 320 lbs. per qr., while barley goes 
at 400 lbs. per qr. From the Gulf ports tonnage is mostly fixed for 
grain on what is called the net form of open charter, which implies 
that all expenses at loading and discharging ports incidental to the 
loading and discharging of the cargo are paid by charterers, so that 
the owners only pay the working expenses of the boat, and what 
commission may be agreed upon. 

"Berth terms" in the United States trade means that the steamer 
is to be loaded as fast as she can take in as customary at port of 
loading, and to be discharged as fast as she can deliver at port of 
discharge. In the Black Sea trade (Odessa, Nicolaieff, etc.), the 
term means that the boat has to be supplied with cargo at the rate 
of so many poods per weather working day, equalling about 350 
tons per day, unless more is stipulated for by owners, say, 500 to 
600 tons per day, and that, if not otherwise stipulated in the berth 
agreement, the time does not count until the boat is in berth — the 
discharge to be as fast as steamer can deliver (after 24 hours? 
notice) . In the Danube trade the term means that after the steamer 
is in berth the cargo will be loaded at the rate of 400 to 500 tons per 
weather working day as may be agreed ; discharge as fast as steamer 
can deliver (after 24 hours' notice). In the Black Sea trade, etc., 
the words "berth terms" carry the following condition, that the mer- 
chants have the option of shipping 5 per cent, less than their engage- 
ments. 

Y.A. (York Antwerp rules) — is applicable to insurance in regard 
to averages. (See Appendix B.) 

"San Lorenzo limit" — to load in the River Parana at a port not 
above San Lorenzo. 



298 OCEAN SHIPPING 

lis. and 10s. (for instance) from Alexandria means U.K. for 
orders lis., Is. reduction if ordered direct to discharging port. 

F.f.b., free of freight brokerage (American charters). 

G.F. refers to time-charters effected with the Government. All 
other charterers now have their own forms of charter, many of them 
being notoriously bad and full of traps from end to end. 

f.t. refers to ore charters, and means "full terms," that is, with 
despatch-money both ends and numerous pickings for charterers; 
on homeward charters despatch-money is at the rate of 10s. per hour, 
and upon charters to the U.S. £15 per day. 

c.i.f., cost (of cargo), insurance, and freight. . 

p.p. (picked ports) used to be such as Rotterdam, Amsterdam, 
London, Hull, Liverpool, Avonmouth, Glasgow, Newcastle, Cardiff, 
etc. Objectionable ports used to be such as Hamburg, Bremen, Nor- 
denhamn, the French Atlantic ports, Londonderry, Limerick, King's 
Lynn, Ipswich, Llanelly, etc. 

"Prompt" means that the steamer is within a week or sO of the 
loading port. "Spot" signifies that the vessel is at the port of loading. 

"Half-and-half" applies to bunkers shipped in Wales, and signifies 
that the coal is to be supplied in the proportions ^f half large and 
half small, but in actual experience this only works out about 30 to 
40 per cent, large, remainder small. "Through coal" means the coal 
is supplied as it is worked, there being very little difference between 
this and half-and-half mixtures. 

"Gulf port" means the Gulf of Mexico, Port Arthur or Galveston 
to Tampa inclusive. 

U.K.H.A.D., United Kingdom, Havre, Antwerp, or Dunkirk. 

"Dreading," option shipping general cargo, charterers paying all ex- 
tra expenses over and above a cargo of grain, and freight to be equiv- 
alent to what it would be with a full cargo of grain. 

"Baltcon." — Code name of the Baltic and White Sea Conference 
coal charter, 1908, from East Coast of England and Scotch ports to 
all ports in the Baltic, Scandinavia and White Sea. 

"Merblanc." — Code name of White Sea wood charter to the United 
Kingdom, 1899. 

"Pixpinus." — Code name of pitch-pine charter, 1906, for the United 
Kingdom, European Continent and Mediterranean. 

"Centrocon." — Code name of River Plate charter-party, 1914, 
homewards. 

"Timon."— Code name of time charter, 1902. 



PAPERS AND DOCUMENTS 299 

"Benacon." — Code name of British North American (Atlantic) 
wood charter-party, 1914. 

C.t.l. — Constructive total loss. 

F.i.a. — Full interest admitted. 

F.a.a. — Free of all averages 

F. and d. — Freight and demurrage.. 

F.a. — Free alongside. 

F.c. and s. — Free of capture and seizure. 

F.o.r. — Free on rail. 

F.p.a. — Free of particular average. 

G.a. — General average. 

N.h.p. — Nominal horse-power. 

O.r. — Owner's risk. 

S.c. — Salvage charges. 

T.l. — Total loss. 

T.l.o. — ^Total loss only. 

W.p. — ^Weather permitting. 

Cotton charters. — In view of the fact that cotton, grain, 
lumber and coal represent the bulk of the commodities 
shipped in tramps from ports of this country, a few words 
should be said about the principal charter parties used in 
the important trades. The most significant cotton charter 
party is the Anglo-American, which, in its original form, 
was adopted by the Chamber of Shipping of the United 
Kmgdom in 1895, but which has since then received 
numerous modifications. We go somewhat more fully 
into the details of this particular contract because it 
serves as a good illustration of the extent to which the 
peculiarities of the cargo and of the trade routes over 
which the cargo is to be shipped determine the character 
of the contract. 

To begin with, it should be noted that great emphasis 
is laid upon the ship's ability to take water ballast suffi- 
cient to allow a full cargo of cotton to be loaded. As we 
have seen from our table of load factors, cotton is so light 



300 OCEAN SHIPPING 

that a full cargo of it will not weigh the ship down in 
the water far enough to insure stability, therefore, ballast 
has to be used to add to the weight. Another stipulation 
is founded upon the large size of the bale in which the 
cotton is shipped. Too many partitions interfere with 
economical loading; therefore, a paragraph of the cotton 
charter stipulates that certain movable partitions and 
other obstructions must be taken down at the ship's ex- 
pense if the charterers demand it. Another paragraph 
reflects the effect of the route usually followed by cotton 
steamers from Gulf Ports to Europe. Moving northward 
along the Atlantic coast of the United States, they pass 
by the most important centres of the bunkering trade of 
this country, namely, Newport News and Lambert Point, 
near Norfolk. Since it is in the interest of the charterer 
that bunker coal encroach as little as possible upon the 
carrying capacity of the ship, he stipulates that a new 
coal supply is to be taken on at Newport News, or a 
neighboring port, sufficient to take the ship across to 
England or to the west coast of Europe. If the ship is 
to go further, either into the Baltic or the Mediterranean, 
coal is to be taken on at a European port. In this par- 
ticular case, the shipowner is paid so much per net reg- 
istered ton, regardless of the amount of cargo loaded. 
That means that the charterer has to pay "dead freight" 
for the unused carrying capacity. 

The "Pixpinus." — The most common charter used in 
the lumber trade is the "Pixpinus" or Chamber of 
Shipping pitch pine charter, which takes its name from 
the telegraphic code word used to indicate it between 
ship brokers. Since its adoption in 1898, it has been in 
extensive use in Europe as well as on the Gulf coast of 
the United States, An interesting feature of this charter 



PAPERS AND DOCUMENTS 301 

is the fact that the number of "lay days" is determined 
by allowing 1.25 days for each hundred net registered 
tons of the vessel. Among timber and lumber 
charter is the European Chaiter Party (Sail $2). As 
the name implies, this form is used for sailing vessels. 
The $2 refers to the provision which requires the ship- 
owner to pay the charterer $2 for each fifty cubic feet of 
cargo, in consideration that the shipper pay the expenses 
of storing as well as the port charges. 

Grain charters. — The greatest variety of charter parties 
is probably to be found in the grain trade. The most 
important used in the grain export from the United 
States is the "Net Grain Charter Party." Contrary to 
the cotton charter which estimated the freight payments 
on the basis of a registered ton under this form the 
amount of cargo determines the freight payments. An- 
other point of distinction is found in the paragraph 
which stipulates that the charterer pay the ship's ex- 
penses at both loading and discharging ports. Besides 
this form, other grain charter parties are frequently used ; 
namely, the "Baltimore Berth Grain Charter Party," 
"Cork for Orders Charter Party," "Berth Terms Grain 
Charter Party" and the "Galveston Grain Charter 
Party." Of these the first two are most commonly used 
in the Baltimore trade, the third one in New Orleans, 
and the last in Galveston, as the name implies. Of these 
the "Cork for Orders Charter Party" is, for many reasons, 
the most interesting. The real title is: "Aproved Balti- 
more Grain Charter Party-Steamer-Range." 

The meaning of "range," — The word "range" refers to 
the provisions in the charter by which the loading port is 
not specified at the time the charter is made. This provi- 
sion requires the vessel to report at some specified place, 



302 OCEAN SHIPPING 

for instance, Delware Breakwater, there to receive orders 
as to the leading port. In case the ship has a cargo to 
discharge in the United States before entering upon the 
service required by the charter, orders naming the load- 
ing port may be sent to the vessel at the last port of 
discharge. 

In this charter, the loading ports are limited to the 
Atlantic coast within a certain range, and for this reason 
the word "range" appears as part of the printed title- 
This form provides also that the ship proceed from the 
loading port to Queenstown, Falmouth, or Plymouth, 
there to receive orders as to the final destination. For- 
merly, the agreement named Cork, as the port at which 
to receive orders, and the expression, "Cork for orders" 
continues to be used. In actual practice at the present 
time, the final destination of the vessel is usually 
determined before the cargo is loaded, so that the ship 
is ordered from the loading port direct to the port or ports 
of discharge.* 

Example of a grain charter. — A widely used grain 
charter party is here given : 

NEW YORK PRODUCE EXCHANGE 



APPROVED GRAIN CHARTER PARTY OF 1897. 
Amended January 1, 1899. 



New York 19 



1. It is this day mutually agreed, between 

Agents for owners of the steamship . 

of built at '. , . .of .. .. 



' Frank Andrews, pp. op. cit. 26, 27. 



PAPERS AND DOCUMENTS 303 

net tons register, or thereabouts, and guaranteed 

Qrs. 10 per cent, more or less capacity, classed 

in now 

and 

That the said Steampship, being tight, staunch and strong, and 
in every -Hray fitted for the voyage, with liberty to take outward 

cargo to for owners' benefit, shall, with 

all convenient speed, sail and proceed to 

or as near thereunto as she may safely get, and there load, al- 
ways afloat, from said Charterers, or their Agents, a full and 
complete cargo, subject to limits above guaranteed of Wheat, 
Indian Corn and/or Rye not exceeding what she can reasonably 
stow and carry over and above her Cabin, Taclcle, Apparel, Pro- 
visions, Fuel and Furniture. Orders as to loading port to be 
given within 24 hours after receipt of notice of arrival at port 
of call in the United States, if in ballast, or before 12 o'clock 
noon on the day of completion of discharge at a port in the 
United States, if with cargo, except on Saturdays, when orders 
shall be given before 11 o'clock A. M. If not discharged on the 
day on which demand for loading port is made, vessel to ask 
again for orders. Vessel to load under inspection of Under- 
writers' Agents, at her expense, and to comply with their rules. 
The cargo to be brought to and taken from alongside at Mer- 
chant's risk and expense, and being so loaded shall therewith 
proceed direct to QueenstOwn, Falmouth or Plymouth for or- 
ders (which must be given within twenty-four hours after Ves- 
sel's arrival at Port of Call, or lay days to count), to discharge 
at a safe port in the United Kingdom or on the Continent, be- 
tween Bordeaux and Hamburg, both included, Rouen excluded, 
or direct to a Port within said limits, (Rouen being always ex- 
cluded), as ordered on signing bills of lading 

or as near thereunto as she may safely get, and deliver the same, 
always afloat, on being paid freight, as follows: 

If ordered from Queenstown, Falmouth, or Plymouth to dis- 
charge in the United Kingdom shillings and pence ( ) . 

If ordered from Queenstown, Falmouth or Plymouth to dis-. 
charge on the Continent, as above, 10 per cent additional on above 
named freight. 



, 304 OCEAN SHIPPING 

If ordered to a direct port in the United Kingdom, 

shillings and pence ( ). 

If ordered to a direct port on the Continent, as above 

shillings and pence. ( ). 

All in British Sterling, for each and every quarter of 480 pounds 
English weight, delivered, in full of Port Charges and Pilotages, 
to be paid on unloading and right delivery of the cargo, in cash, 
if in the United Kingdom, and in cash at current rate of Ex- 
change for Banker's Shortsight Bills on London, if on the Con- 
tinent, always without discount or allowance. 

2. It is also mutually agreed that the Carrier shall not be liable 
for loss or damage occasioned by causes beyond his control, by 
the perils of the seas or other waters, by fire from any cause, or 
wheresoever occurring, by barratry of the master or crew, by 
enemies, pirates, or robbers, by arrest and restraint of princes, 
rulers or people, by explosion, bursting of boilers, breakage of 
shafts or any latent defect in hull, machinery or appurtenances, 
by collisions, stranding or other accidents of navigation of what- 
soever kind, (even when occasioned by the negligence, default 
or error in judgment of the pilot, master, mariners, or other 
servants of the ship owner, not resulting, however, in any case, 
from want of due diligence by the owners of the ship, or any of 
them, or by the Ship's Husband or Manager), or unseaworthi- 
ness of the ship, even existing at time of shipment or sailing on 
the voyage, provided the owners have exercised due diligence to 
make the vessel seaworthy. 

3. It is also mutually agreed that this contract is subject to all 
the terms and provisions of, and all the exemptions from liability 
contained in the Act of Congress of the United States, approved 
on the 13th day of February, 1893, and entitled "An Act Relat- 
ing to Navigation of Vessels, etc." 

4. Captain to call at Broker's office, as requested, and sign 
Bills of Lading, to any rate of freight as presented, without pre- 
judice to this Charter Party. 

5. Freight, as per bills of Lading, to be taken without deduc- 
tion in payment of this Charter, any deficiency to be paid at Port 
of Loading, in cash, less insurance, on signing Bills of Lading, 
and any suVplus over and above estimated Charter to be settled 
there before the vessel clears at the Custom House, by Captain's 



PAPERS AND DOCUMENTS 305 

draft, in Charters favor, upon Consignee, payable five days after 
arrival at port of discharge. 

6. Vessel to load and discharge at such wharf or in such dock 
as may be named by Charterers or their agents, provided not 
conflicting with above terms, and no extra detention or expense 
is thereby incurred by Vessel. Should Vessel have to haul for 
cargo more than once, Charterers to pay the expense of towage 
after the first move, and time so expended to count as lay days. 
At Port of Loading cargo to be delivered on board of Vessel by 
elevator or otherwise. Steamer paying usual trimming charges 
only. If more than one kind of grain is shipped, any necessary 
expense incurred for separations to be paid by Charterers. 

7. ( ) running lay days, Sundays, and 

legal holidays excepted (if the vessel be not sooner dispatched), 
to be allowed for loading and discharging Vessel, and if longer 

detained. Charterers to pay demurrage at the rate of 

( ) pence British Sterling, or its equivalent per net register 
ton per day, payable day by day, provided such detention shall 
occur by default of said Charterers or their agents. Lighterage, 
if any, always at risk and expense of cargo. 

8. Lay days, if required by Charterers, not to commence be- 
fore 

9. Charterers or their agents shall have the option of cancel- 
ling this Charter Party if the Vessel be not ready to receive 

cargo on or before the Such readiness shall 

include the arrival of the vessel at the loading port, entry there- 
of at the Custom House, and all compartments ready to receive 
cargo as shall be shown by the Master's written notification, ac- 
companied by Underwriters' Surveyor's pass to that effect, 
which must be presented at the office of the Charterers, or 
their Agents, at or before 4 P. M., or if on Saturday before 12 
o'clock noon of said day. This option to cancel shall be exer- 
cised not later than the presentation of the said Surveyor's pass 
of readiness. 

10. Lay days for loading to commence at 7 A. M. on the day 
after vessel is ready to receive cargo, provided vessel is at load- 
ing place as ordered, otherwise days to count in accordance with 
the Rules governing at port of loading, and provided Charterers 
have received due notice, in writing, of readiness at their office, 
accompanied by Surveyor's Certificate of such readiness not 



306 OCEAN SHIPPING 

later than 4 o'clock P. M., except on Saturdays, when notice of 
readiness and Surveyor's Certificate must be tendered at or 
before 12 o'clock noon. 

11. Should the Steamer be ordered to discharge at a place to 
which there is not sufficient water for her to get the first tide 
after arrival without lightening, and lie aways afloat, lay days 
are to count from forty-eight hours after her arrival at safe an- 
chorage, for similar vessels bound for such place, and any lighter- 
age incurred to enable her to reach the place of discharge, is to 
be at the expense and risk of the receiver of cargo, any custom 
of the port or place to the contrary notwithstanding, but time 
occupied in proceeding from anchorage to the port of discharge 
is not to count. If the cargo cannot be discharged by reason of 
a strike or lockout of any class of workmen essential to the dis- 
charge of the cargo, the days for discharging shall not count 
during the continuance of such strike or lockout. A strike of 
the receiver's men only shall not exonerate him from demurrage 
for which he may be liable under this charter if by the use of 
reasonable diligence he could have obtained other suitable labor, 
and in case of any delay by reason of the before-mentioned 
causes, no claiiri for damages shall be made by the receivers of 
the cargo, the owners of the ship, or by any other party under 
this charter. 

12. In the event of steamer being ordered to discharge in 
Scandinavia, Denmark, the Sound, Baltic or Gulf of Finland, and 
on arrival at destination be unable to enter port or discharging- 
berth on acount of ice or frost, she shall have privilege of pro- 
ceeding to nearest safe port or berth and there discharge; freight 
to be paid the same as if discharged at port or berth to which 
she was ordered, and steamer shall also have the further priv- 
ilege, if ordered to a destination as provided for in this para- 
graph, of calling for coals in the United Kingdom. 

13. In the event of steamer being ordered to discharge at a 
port beyond Gibraltar, she to have the privilege of coaling at 
Gibraltar. 

14. Charterer's liability under this Charter to cease on cargo 
being shipped, but the Vessel to have a lien thereon for all 
freight, dead freight, demurrage and/or average. Steamer to 
have liberty to tow and be towed, and to assist Vessels in all 



PAPERS AND DOCUMENTS 307 

situations. General average, if any, payable according to York- 
Antwerp rules of 1890. 

IS. Cash for Vessel's ordinary disbursements at Port of Load- 
ing to be advanced by Charterers, if required by master, at 
current rate of exchange, subject to insurance and two and a 
half per cent commission. 



16. A commission of five per cent, and the customary Freight 
Brokerage is due by Vessel on signing of this Charter Party to 

Vessel lost or not lost, whose Agents at Port of 

Loading are to attend to ship's business on customary terms. 

17. This Charter Party is made subject to the rules of the New 
York Produce Exchange, and all disputes arising at port of 
loading shall be subject to arbitration at New York as therein 
provided. 

18. Penalty for non-performance of this agreement, estimated 

amount of freight Witness to the 

signature of 



As Agents by authority of 
.Witness to the signature of 



HEREBY CERTIFY that the foregoing is a true and correct copy 

of the original Charter Party on file in office. 



Peculiarities of the fruit trade. — The West Indian fruit 
trade, because of its nature, employs the time charter 
party almost exclusively. A feature of the fruit charter 
as distinct from other forms, is the restriction "that on 
account of the perishable nature of the cargoes that 
this steamer is intended to carry, she is not allowed to 
stop to pick up any wreck or in any way assist or tow 



308 OCEAN SHIPPING 

any vessel, especially when by so doing she is liable to 
be detained, only in order to save human life." ^ 

Unless it is prohibited by the terms of the charter 
party, the charterer may sublet a portion or the whole 
of the ship or he may transfer the charter to others. His 
freedom of action, however, in charging for the space so 
offered is limited so as to discourage this practice. 

Papers used in the line business. — Shipments of less 
than cargo quantities are handled almost exclusively by 
liners. Because of the liner's legal status as common 
carrier and because of the complexities of the problem of 
handling thousands of shipments of various shapes, sizes, 
weights and values, the forwarding routine is much more 
complicated and the number of papers used considerably 
larger. 

The papers which constitute the record of the dealings 
between the carrier and the shipper, the shipper and the 
Government authorities, the consignee and the insurance 
concern, are styled "Shipper's Papers," not to be confused 
with the "Ship's Papers," which represent the dealings of 
the carrier with the Government and the operation of the 
vessel. 

These shipping documents may be further classified ac- 
cording to the authority requiring their execution. On this 
basis we may distinguish documents required by the carriers 
such as cargo contracts and booking records, dock receipts, 
tally sheets, dock sheets, bills of lading, parcel receipts, 
notice of arrival delivery order and delivery receipts. 
Government documents form the next group. They may be 
subdivided again according to whether the United States 
Government or a foreign government requires them and also 
according to whether the shipper or the carrier has to fill 

1 Ihid. p. 28. 



PAPERS AND DOCUMENTS 



309 



them out. They are too numerous to be fully discussed in a 
general treatise on Ocean Shipping. They are carefully ex- 
plained in Grover G. Huebner's Ocean Steamship Traffic 
Management. Additional data are found in Paper Work in 
Export Trade (Document Technique) by Snider, Maule and 
MacElwee, Department of Commerce, Bureau of Foreign 
and Domestic Commerce. Miscellaneous Series — No. 85. 
Finally there is a third set of papers which is characteristic 
to the forwarding business. 

Packing and marking. — In order to make the following 
analysis of the shipper's papers as.clear and concrete as pos- 
sible, we begin with an illustration^ showing one of the cases 
belonging to the particular shipment referred to in the 
following document. 




It will be noticed that on the case are printed, among 
other things, the name of the shipper, consignee's shipping 
mark and the serial number of the case. 

1 This and the foUowing cuts are taken from a pamphlet of the 
National Association of Manufacturers, who kindly have consented 
to their use. 



310 



OCEAN SHIPPING 



The shipping permit. — ^When an agreement has been 
reached in regard to the ocean freight rates on the goods 
to be transported, either by the exporter himself or 
through a forwarding agent, a shipping permit is issued 
by the steamship company which is to carry the freight. 
The permit here reproduced instructs the clerk of a given 
steamer to receive from a named shipper on specified dates 
certain packages of icargo for shipment to a given port of 
destination. Many firms use more complicated permits, 
containing many more details and a full set of terms and 
conditions. Frequently this shipment is carefully described, 
weights and shipping marks being given. 

SHIPPING PERMIT 



Send Bills of Iruling to our office immedUtel; on receiving the receipt from dock 



Pi 









No tfii{le padUfc Tolucd on* 
$ 100 unlca noud licnoa. 



Clerk of Steamship.. 



42 BROADWAY. 
New York,- 



-A pri l a. 



in?. 



Tsrai 



For 

From 



-MnnteTldeo 



-Please rtceive— Twen ty - tw o (aa)-OB»<«- 



Cargo for different porta to be kept separate on Ligfaters- 

No freight received after 6 P M., or 12 o'clock noon on Saturdays, unless special stipulation to tbat cSeci u made 
1 this permit 
April 7, ■miT ■ 



SIMDcr BI Limporr & Doll LiBi 

PlH t, Robert Slorei, OfooklxD. N. V. 



And oblige, 
LAMPOl 



ILT LTD. 



Courtesy National Association of Manufacturers. 

The Dock receipt.— The driver who takes the shipment 
to the dock is given the following dock receipt, signed by' 
the receiving clerk of the steamship company : 



PAPERS AND DOCUMENTS 
DOCK RECEIPT 



311 



LAMPORT & HOLT LINE 

42 BHOADWAV. 



NO. 1846. 486 __ 
new vftpii April 7^ ^ t9i7 



VccelMA •! t» ■— • UnTnnhy BTprfl i!! Co. , 



Hamttsa fa int Sc Tit 

• uUruIJ^i lbs fOIIoirlDf nnatwr al arilcln uul pickisn, Durkoil, u iHleil twtair (eoDtcBti uil a 



ibc iblppcr, In ■spucni looa ori1« uil condJIlsB 

beiliJn nuika aiiil onntien ankpoirn bclns u 

dadind lot lUpptr aod doI to be d«ni*d Mrt at dcwtlpUos at sood* btttbr nnlnlML (or Dor trlOnitt Ibirtof ■■ aciluit lb* Limport t Holt Un«). (or iBIpinDl 

OB s. s Tardl .■ , f„, Montevideo : <„ pon or (raonupmni rr 

il—agf Am aat prowj tn nW porB ih« tmipart A Bolt Uno rCTtrrtat tbi rttb I to ahip njd fcnda Id wbolc or la pari Id or npoo a prior ar ■abowiiitnl alwiatf 



..... 




."u». 


■IHB » 


...P»....Ci...T.»..eO.T»T...TC 


■ . 


1-4 


4 






f/\g 


S - 7 


S 




n n 


/ci«\ 


-ii-li 

11 - 18 


3 


a 


« , ., 


MOHTWIDEO 


a 


n 


. EDtimfil 




19 - 2a[ 4 


" 






. 1. 




GrOMi wnlght n^ cliliimniit 




1 ■ 




1694 1*B. 



1 o( erlwr (oodi, rlola, ■ 

TM Lampari A Boll LiDc'B nsnlar bill ol Udlna la a« bf It for almllar abJpineBia (rpoo (ba bnili of wblcb 
oil* to (bg aljDTE Dimnl italppir. Tba LiDpeit & 'Holt Una abiH not bccnma rnpooalble (or (ba imM aa 
act. UDIII iixb tnilloc II (bill b« lUblo oDlf tor ton or duufo okuIbbM b/ Ha (idIi, oucb ai ao omjoatr billco 
ccpllooj Ud llmliailoBo of Uabllltj asd tiIik nsUlDnl In laUl ninilar bill oC ladlai wlib vblcb aklpptri on 
HBdenind to biTO acqoiloicd ItwDarlm ■o'l >o auml In. It lbs laloc al aor ol Ibc (ooita urfcda 1100.00 per pacbact. a nte of ttilibl bitnl Ibitvon tuoit bo 
utOBacd brton Icodfr of tbc (oedi tor ablposcnt anil ibr Tatoe et Ibc pwda bo Occtarad an dcllTrry at Ibc dort aoil iBacrlod bcnin falHoc oBlcb, Ibt nodi ihill 
b* nnclBilTFir deemed rf«tlrrd »ab|in to ibe bIH of ladiac liDliailaa of eatiw and llibllltr la Ibo iDeoln estt Dol cieeadlnfl llM.Od per paekiia. 

'- - a will be rclltd « la Hiadllng lb« fooda, and If IBCBrrcGt, ohlpptr aod/Dr copalpif* aball be mpoDilblo Mr an/ Imo m 



. ilrad BDlDaci lo Mv ai 
I aaeea. rhb or tRHIiln ot anr aorl and ibc llki 
I frrlibt raW ara And) aball be luutd tor aald 
< carrier DBIII Ibe faoda ara aciaallr loailod on ale 
aabject a 



n* dultufhHi «t •!( food* nail be wiarttd apm aoel fociafo la Ulltrt jiol ttif ( 

ttU% RECaPT MUST BC SENT IN aTT«CHED TO THE aiLL or UUMNS. 



»MIPPEM JMB REqUlHtP TO FILL OUT AS BELOW 



No;, of I 

Package j 



1-4 eaoli 

/s - 10 " 



,11 



18 



iI9 * ZZ 



licngth 



Depth 



Solid Contests 



Weight 



118 

113 

39 

58 



Courtesy National Association of Manufacturersa 

The bill o£ lading. — The dock receipt is afterwards ex- 
changed for the steamship bill of lading which, as the final 
receipt and as the negotiable instrument, representing the 
title to the shipment, must be particularly well guarded. 



312 



OCEAN SHIPPING 
BILL OF LADING 



UMKIRT « HOLT LINe-IIIVER * 



■ ffSfb^Jn^-^SSi'u^S/w 



B/LNo. 4,182 



Polt elSUpmea NEW YORK 



Steamet- 



TBriil 



Bound f or_A^_-Uont£xidflAw 



SlappCT 



F a m i PP Ttnint. » VflTTilah. Mf B . fln - 



CmuJ^iue: Order of Td 



-iftr Assignii 



-Jfedertcn GoBiBZ fr fila., SnTpnill 44fl. 



weiCHTS IN LBS. 




1-4 

5-7 

8 -10 

11 -18 

19 -22 



Prepared paint 
Prepared paint 
Prepared patnt 
Enamel 
Varnlab ' 



472 
492 

isi 

312 
4£4 



412 
392 
392 
240 
364 



.49 ,00 
37 ,00. 
37.00 
94.00 
30.00 



.^ 



^^f^-^'^ 



nIN TRANSIT TO 
AT SHIP'S EXPENSE BUT SHIPPERS RISK. 



lany by Its 



•BBMd, >* luUr •• if (KHtf br (U at tbni. 

In Mltnesff vbeieof, the ( 
roproaentatlves has signed., 
of Lading (excluslvo of copies) all of the s 
tenor and date, one of which belnff accomp- 
llahed the ottiors to stand void. 



Datctat NewYoi 



rkyiM./JL^.^192p 



ay^ 



_i4t=aA^=^<:_ 



RATC I FREIGHT 



!:.'„. I 



^_SzS 



Jo*! /3 



PREPAID i 



w 



Tc 



Courtesy National Association of Manufacturers. 



PAPERS AND DOCUMENTS 313 

It is necessary for the shipper to prepare from three to 
eight or even more copies of the bill of lading, the exact 
number depending on the number of copies required by 
the steamship company, the consul and the shipper, re- 
spectively. In the particular case illustrated by our fac- 
similes, the following rules apply: "For shipments to 
Uruguay, three copies must be certified by the consul, 
a charge of $1.10 being made for this. These copies, 
already endorsed by the shipper, are then signed by the 
steamship company and thus made 'negotiable.' Posses- 
sion of any one negotiable copy conveys ownership of 
goods. A total of eight copies have been prepared to be 
disposed of as follows: Three (negotiable) to bank en- 
trusted with collection of draft, two to steamship com- 
pany, one (Spanish) to Consul, one for shipper's files, and 
one may be sent to customer for latter's files." ^ 

"Straight" and "order" bills of lading.— Two kinds of 
bills of lading are distinguishable — the straight bill of 
lading, and the order bill of lading. The straight bill 
of lading is made out directly to the consignee and is 
used when the shipment is paid for in advance or when 
the goods are shipped on open account, or when 
the country of destination expressly forbids to ship "to 
order." The to order" bill of lading is usually made out 
to the shipper; it is negotiable and transfers the title 
to the consignee by endorsement.^ 

Shipper's export declaration. — Besides one or more 
duplicate copies of the bill of lading, the steamship com- 
pany requires a shipper's export declaration, as follows: 

* {National Association of Manufacturers), "An Export Order 
and Allied Topics" p. 19. 

Tor a detailed discussion of the Steamship Bill of Lading, see 
Annin., op. cit., Chapters XXIV and XXV, also G. G. Huebner, 
Ocean Steamships Traffic Management, Chap. VII. 



314 



OCEAN SHIPPING 



U. ft TRSASURY DErABtUKMT. 
CiMtonia CM. No. TOU. 

T. D. UTO, CO., Mot. aM&. 



ORIGINAL— (For United SUtea Outoms Use Only}. 

SHIPPER'S EXPORT DECLARATION 

OF MEBCHWDISE SBIPFED TO FOREIGN COVNTBIES OB NONCONTIGUOUS TEBBtTOBIES OF THE U. i 



MmtaadlH ■Upped l^r W«i!Hl«« Pnint fc 7arti1«>i Mfg. nn ., 

(Nanu o( ihlppar.) 



JM>.. 



sireei Ohureh.- 



-Bw-Yorlc 

(PUD* W vlftaal fUpmMt, ) 



CUj ..Hea-Yoik Stole ..JI...Z, 

Vi» 



(OurtarCratnlilUiior poini, UiBj.) 



For lUpmoiC cntbe ...Srltl«b ■S..-S.>-fyexdl?— 



uuDt, inoUva powsr, and Use II known.) 

Ftam Jtev.-Xoxk To port or — UonteTldeo. Counirj of — .nniauajr—. 

(U. S. CnfMoii p«t oTuptruitoa.) (Pvairji pan.) (Plail AatliuHoD of 



IUU9 im HDMUn, 



QDUinTT. 

atala numbv 
of pounds, teu 



niROR FlODDCn 




.4-jSBaai L_Pxe]paijad.. 



.S-AOMI . 

.S-j£aaai . 
.4-joaaa . 



r«i1nt. In t.1m 

JFxeJlar.ed..jialiit...la..tliia 
JC£e;ara<l..jpalnt...ia_t loa 

..Bnaiafl2^.1n_tliui 

..Taxiilsli-ln..$.lni_ 



.&4.gala. __|L49.a4... 

as..gala. 36...86... 

i 
OB .eal«f 2fi..aS. 

_S.Q..gal«i 



-JAJift... 
-JSflLAL 




(^«**.^ 



Sri."SiiS;:5l" W.7bOI«rm«iif«*No 



(MartwMUdtpbyci 



DedsradooC. H. No... 



I, tb« undcraigiied, Bolomaly and truly decUro that tho Kbovo statoment is a complete, jiut and true account of all morchandim shipped 
bv tho party namod : on board vie vcnol, car or vahicle: and lo the place or country named aoove; and that tho desjiripUoa and quanttty 
ofeacharticlebtrulystatAd.and that the values tboieojato the actual coata at values at the time and place ol shipment for exportation. 



Swora and subscribed I0 bofore me 




Bignataxti 



Tbl) oolh to b« takiD tMrora DDtuy, ooUnctor ol ct: 
mUu. TblidadnralloDmiiit b«il(Mdbut oalbrHwdni 
■r lfaxlc«bf air,T*blcl*,ar(NTy: or oaiUpnuiti byn 
Hub* doM not «iM«d 11(0. 



rnlllh Vfg. CB. 



ir offliw BUtboilMd to oilmliilitar 
D ■xparlattoni to CiMd* 
o anj cauDlrr II total nlv d 
•»-4ur 



PAPERS AND DOCUMENTS 315 



PBEPARATION OP EXPORT bfiCLARATIOrf~(Bc«d Canlmllr.> 



1. THE SHIPPER MUST PREPARE THIS EXPORT DECLARATION and subscribe to the oath httort i «U3loma 
cflicer, notary, or oilier authorized ofCicer. Tlic declaration must be aisncd by the shipper, but the oath may be omitted on 
any shipment for exporiaiion by vessel if the total value of the items docs not exceed tlOO and on shipments regardless 
of vatuc to Canada or Mexico by car, vehicle, or ferry. If the declaration is executed by an agent (or the shipper (he 
authority must be in writing on this declaration or other document filed with the Collector. The values and names of 
shippers may be omitted from the duplicate, but must always appear on the originaL The original is for the use ct( 
cnsioms ollicers and will be treated as confidential and infoimalion not disclosed, without wrillen authority of the shipper 
or his agent. Export statistics are compiled from these declarations and all data required on the prescribed form must 
be furnished. 

3. DOMESTIC ARTICLES EXPORTED.— Ttie value of all articles grown, prodttced, or nunufactored in whole or 
part in the United States must be statiid in the cohimn of "V, S. Products." 

3. FOREIGN ARTICLES EXPORTED.— The value of articles of foreign origin shipped out of the United States in 
the same condition as imported must be stated m the column of "Foreign Products." If foreign articles^ are subjected to 
any process of manufacture or alteration m the United States they become United Slates products and must be reported 
as such. Thus: Imported raw sugar refined in the United States should be reported as a domestic producL 

4. THE VALUE OF ARTICLES to t>e stated is the selling or invoice price or the actual cost.or true market value at the 
lime and place of shipment for exportation. > 

5. DESCRIPTION OF ARTICLES EXPORTED must be accurate and complete. General terms such as dry goods, 
groceries, meats, machinery, millinery, etc, will not be accepted. In the case of cheese the declaration must stale whether filled 
or unfilled, oleomargarine whether colored or uncolored, butter whether pure, adulterated, or renovated. 

6. THE KIND OF PACKAGES as boxes, barrels, etc., and the net weight exclusive of outer coverings, must be specified^ 

7. THE TOTAL QUANTITY of each article expressed in the usual measure of pounds, yards, gallons, etc., must be 
staled. Domestic spirits exported must be stated in gallons of SO per cent alcoholic strength. 

8. THE COUNTRY OF FI'NAL DESTINATION OF GOODS— that is, the country to which goods are sold— must 
Ac i.hown Special care should be exercised tp stale the final destination of goods shipped through Canada to Europe, and of 
ijDods to l>c transshipped in the United Kingdom, the Netherlands, Germany and France en route to other countries. 

9. INSPECTION CERTIFICATES^Process butter orbutter adulterated or renovated must be accompanied by certifi- 
cate of purity issued by the United Stales inspector of dairy prodncis Certificate of inspection must be presented to the Collector 
for meat and meat food products exported when required by the regulations of the Dcparimeni of Agriculture. 

10. EXPORT SCHEDULE B may be obtained free of charge from the Bureau of Foreign and Domestic Commerce, De- 
partment of Commerce, Washington, D. C, and will be of much assistance to exporters. 



Courtesy National Association of Manufacturers. 



316 OCEAN SHIPPING 

Shipper's manifest. — Clearance is not granted until this 
form has been properly filled out and sworn to before a 
customs officer, notary or other authorized officer. This 
paper is also known as the "Shipper's Manifest." 

"The declaration is prepared in duplicate and after 
being sworn to, the original is retained by the Collector 
of Customs. The duplicate is then taken to the steam- 
ship company with the bills of lading, now ready for 
signature, and is later delivered to the Collector of Cus- 
toms by the steamship company. Export statistics are 
compiled by the Government from these declarations and 
all data called for must be furnished. The name of the 
shipper and the value of the various items of the ship- 
ment may be omitted from the duplicate. 
. "These forms may be obtained from the Collector of 
Customs at a low charge. They may be printed by private 
parties providing they conform strictly to the official 
form." 1 

Consular invoices and other documents. — Many 
countries require that additional documents accompany 
the shipment. 

"Consular Invoice. — This document is required when 
exports are consigned to Central and South American 
countries, Cuba, Mexico, and Portugal. The various 
countries have different forms which may be obtained 
and sworn to at the Consulates, fees being charged for 
certification. The number of copies required varies from 
one to seven, the various countries' regulations in this re- 
spect differing. Particulars must be given of the ship- 
ment and its value, shipping charges, etc." 
"Certificate of Origin. — By a number of foreign coun- 

' National Association of Manufacturers, An Export Order and 
Allied Topics, pp. 16-17. 



PAPERS AND DOCUMENTS 317 

tries, among which are Argentina, France (in the case 
of most goods), Italy, Japan, Nicaragua, Paraguay, 
Spain, Turisey, and Urugay, a certificate is required 
stating that the goods to be exported are products or 
manufactures of the United States. Where countries 
have two tariff schedules, this certificate is necessary to 
secure the minimum duties. Various fees are charged in 
connection with the execution of certificates of origin, 

"Non-Dumping Certificate. — Some of the British 
Colonies — Canada, South Africa, Australia, and New 
Zealand — require a certification by the shipper that there 
is no difference between his export prices and discounts 
and those granted on the same goods in the United 
States domestic markets ; or he can give a list of his 
domestic and export prices and discounts. By these 
means the Colonies seek to prevent the flooding of their 
markets with foreign goods at sharply cut prices, or 
prices below the cost of output." ^ 

The exporters' invoice, the statement of charges and 
the memorandum note are also made out by the shipper 
but do not directly concern the steamship company. In- 
stead, they form the basis of a transaction between 
shipper and consignee, or shipper and financing banker. 

The insurance documents will be discussed in a sep- 
arate chapter. 

Ship's papers. — An entirely different set of papers is 
known as "the ship's papers." The most important of 
these are.^ 

Ship's manifest.— A list of all consigned cargo, the 
destination of each item, its quantity, weight, distinguish- 

* Guaranty Trust Company of New York, Shipping's Share in 
Foreign Trade, p. 19. 

2 Shipping's Share in Foreign Trade, op. cit., p. 22. 



318 OCEAN SHIPPING 

ing marks and numbers. Before the vessel clears or 
enters a port a copy of the manifest must be filed with 
the Collector of the Port. It is used in connection with 
the Shippers' manifests as the basis of the Government's 
foreign trade statistics and also as a check on import 
duties. It is also necessary to file a copy at the foreign 
port of clearance or entry arid other copies are carried for 
use on the ship. For sample inward manifests see Appen- 
dix A. 

Port Sanitary Statement. — This is issued by the port 
authorities, and certifies that no dangerous or contagious 
disease in an epidemic form exists in the port of sailing. 

Shipping articles. — ^An agreement between captain and 
crew as to the conditions under which the voyage is 
undertaken. A certified copy must be obtained before 
the vessel can clear for a foreign port. 

Crew list. — In addition to the shipping articles a list of 
the crew, giving the name, description, birthplace, and 
residence of each member, must be deposited with the 
Collector of the Port before sailing and a certified copy 
secured for use on the voyage. 

Certificate of admeasurement. — Also known as Ship's 
Register. It gives a list of measurements of various 
parts of the vessel, by which the gross and net tonnage 
of the ship is arrived at. 

Inspection certificate. — Issued by the Government In- 
spection Service, and certifies that the regulations con- 
cerning officers, crew, and equipment have been complied 
with. 

Log-book. — A record of the ship's voyage, which must 
be kept by the master while the vessel is at sea. 

Clearance certificate. — This having been secured^ the 
vessel is free to leave for a foreign port. 



PAPERS AND DOCUMENTS 319 

The following is a list of additional documents that 
should be handed to the master on his departure.^ 
Bills of lading (copies) 
Freight list (copies) 
Out-turn manifest (on which to note shortage, 

average, etc.) 
Storage plan. 

Letter of voyage instructions. 
Forms of log extracts (deck and engine) 
Forms for voyage reports. 

' Annin, p. 169. 

REFERENCES 

Annin, R. E. Ocean Shipping. Chaps. XXIV-XXIX. (1920). 

Backer, E. L. Export Technique. (1916). 

Guaranty Trust Company of New York. Shipping's Share in 
Export Trade. (1919). 

Hough, B. O. Practical Exporting. (1915). 

— NER, G. G. Ocean Steamship Traffic Management. Part II. 
(1920). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XII. (1919). 

National Association of Manufacturers. An Export Order and 
Allied Topics. (1919). 

Owen, D. Ocean Trade and Shipping. Chap. V. (1914). 

United States. Department of Commerce, Bureau of Foreign and 
Domestic Commerce. Paper Work in Export Trade. Miscel- 
laneous Series No. 85. (1920). 

Department of Agriculture, Bureau of Statistics. Ocean Freight 
Rates and the Conditions Affecting them, (1907), 



CHAPTER XVI 

PASSENGER SERVICE 

Significance of liner tonnage. — In number and carry- 
ing capacity, passenger ships, that is, express steamers and 
combination liners, are far outnumbered by the cargo boat ; 
but in many respects, the passenger ship plays a more impor- 
tant part than the freight vessel. Because of the exacting 
requirements of passenger travel, regarding speed, safety 
and comfort, the passenger ship represents the acme of 
marine construction. Success in the passenger business is 
largely a matter of notoriety. It is for that reason that the 
passenger boat is widely advertised and each newcomer in 
the field is heralded and discussed throughout the travelling 
world. Furthermore, national pride and rivalry developed 
types of passenger ships which, economically speaking, were 
to say the least, premature and could not have been afforded 
by private capital without both the moral and financial back- 
ing of the nation. Last but not least, the passenger liner, 
because of its speed and size, plays an important part, 
entirely foreign to the cargo vessel, as a naval auxiliary in 
times of war. To be sure, tramps and cargo liners likewise 
are an indispensable national asset in times of war, but they 
do not become a part of the fighting machine as do the fast 
liners, 

History of ocean travel and emigration. — Passenger 
ships, especially those of the express steamer type, are a 
very recent development. One might almost say that ocean 
travel did not exist before the advent of the steamship. The 
sailing vessel was too irregular and its use entailed too many 
hardships to permit any but the most necessary travelling. 

320 



PASSENGER SERVICE 321 

To understand the evolution of ocean travel we must divide 
passenger movement into classes. 

To-day, that is in normal times, emigrants, going from 
overcrowded countries to underpopulated lands, represent 
the bulk of ocean travel. The remainder may be divided 
into tourists, who travel for pleasure, and those who cross 
the ocean for commercial, political, missionary, and other 
purposes. Of those the pleasure-seekers form the youngest 
branch, since the prerequisite of this kind of traffic is a 
highly developed type of passenger vessel. We might say 
that it is not more than fifty years old. Commercial travel, 
in the modern sense of the word, is not much older. In its 
early beginnings, international sea-borne trade was carried on 
by merchant mariners who accompanied their wares on their 
own ships. Not until the common carrier had replaced the 
private carrier, and not until means of communication had 
reached a fairly high degree of development, did an appreci- 
ably large number of salesmen cross the sea. Migration, on 
the other hand, can boast of a longer history, as is amply 
illustrated by the colonization of this country. But the 
Industrial Revolution caused, in the Old World, a rapid 
increase of the population and, in the New World rendered 
possible the opening up of the vast area of virgin soil, which 
before the coming of the railroads were practically deserted 
prairies. The Industrial Revolution has greatly stimulated 
immigration across the sea. So also this most important 
branch of ocean travel is a development of the nineteenth 
century and did not assume the enormous proportions of 
to-day until the century's very end. This is shown in the 
table on page 322. 



322 



OCEAN SHIPPING 



AVERAGE ANNUAL IMMIGRATION INTO THE UNITED 

STATES FROM VARIOUS COUNTRIES DURING 

THE YEARS 1825-1914 

(Based on figures published by the U. S, Immigration Bureau.) 





AvengB Atmnal JjniiiigratiDa from 


PercmOAgt odntributed by 


!p.*ir 


AU 

CanDtnof. 


UnluJ 


Gnraw. 


Siundiii. 
mviK 


lul,. 


Aurtrii. 


ROMU. 


Tnrkey, 

and 
Portugal. 




J 

1 


1 


1 


t 


J 


1 


il))?J5-l914 


No. 


Ho. 


No. 


No. • 


No. 


No. 


No. 


No. 


Per 


Pop 


fei 


Per 


Per 


Per 


Par, 


(Deceimial 

>.mil.); 


















»Dt 


cent 


seat 


DODt 


cent 


Beat 


ceot. 


1826-34 ... 


32,0M 


14,000 


4,000 












44 


12 












1835-44 ... 


71,000 


41,000 


19,000 


— 


— 


^ 


_ 


_ 


58 


27 


_ 


_ 


_- 


_ 


_ 


1846-64 ... 


294,000 


168,000 


96,000 


2,000. 










57 


32 


1 










18J6-61 ... ■ 


160,000 


79,000 


49,000 


2,000 


1,000 


_ 





1_ 


53 


33 


2 


I 





„_ 





186M4 ... 


334,000 


134,000 


113,000 


22,000 


3,000 


•3,000 


2,000 





40 


33 


7 


1 


1 


1 


__ 


1876-84 .. 


389,000 


103,000 


109,000 


46,000 


13,000 


17,000 


10,000 


— 


26 


28 


12 


3 


4 


3 


_ 


1885-94 ... 


463,000 

<e3,o5o 


119,000 


98,000 


56,000 


47,000 


. 48,000 


38,000 




26 


22 


12 


10 


11 


8 




1896-04 ... 


66,000 


28,000 


38,000 


114,000 


102,000 


37,000 


18,000 


12 


6 


8 


26 


22 


17 


4 


1905-14 <,. 


1,012,000 


96,000 


.34,000 


41,000 


220,000 


236.000 


199,000 


67,000 


10 


3 


4 


22 


23 


20 


6 


(2) I8S6-l3n 






























































1895-99 ... 


276,000 


63,000 


24,000 


26,000 


60,000 


47,000 


41,000 


•Kooo 


19 


9 


9 


22 


17 


16 


2' 


1900-04 ■ .. 


661,000 


69,000 


31,000 


52,000 


168,000 


157,000 


113,000 


31,000 


9 


5 


8 


26 


24 


17 


5 


1905-09 ... 


989,000 


104,000 


35,000 


45,000 


218,000 


244,000 


187,000 


45,000 


11 


4 


5 


2i 


25 


19 


b 


1910-14 ... 


1,036,000 


6it,000 


32,000 


36,000 


^21,000 


226,000 


211,000 


69,000 


9 


3 


3 


21 


22 


a) 


7 



The effect of the war on tonnage supply. — Special 
emphasis should be placed on the fact that, as facilities beget 
trade, they also stimulate travel. Thus, to-day, perhaps 
millions could cross the water if the necessary steerage 
capacity were available. But, at this moment, only 750,000 
at best, could cross within a twelvemonth's period by means 
of the available steerage capacity. When it is known that 
large masses of people are pressing against the gateways 
of overcrowded continents, tonnage tends to increase to 
take care of this potential human cargo. Such a situation 
has arisen today as a result of the Great War. 

"Perhaps there was no class of ship which was as heavily 
hit by the submarine campaign of the Central Powers as 
the passenger liners with ample immigrant accommodations. 
The Hamburg-American Line and the North German-Lloyd 



PASSENGER SERVICE 323 

Steamship Company were prominent in the steerage traffic. 
As the result of the war, the German companies were driven 
from the seas and their vessels were distributed among the 
Allies. Thirty of the finest liners were acquired by the 
United States through seizure, while the choice of the ships, 
which were delivered to the Allied Transport Pool after the 
signing- of the Armistice, went to the British. These ships 
are just being placed in commercial service again. 

"Of the thirty former German passenger ships now flying 
the American flag only two — the Callao and the Moccasin, — 
are being operated on commercial routes. 

"It will require an average of about five months to recon- 
dition and refit the former German ships after the army 
re-delivers them to the Shipping Board. The Leviathan, the 
largest ship afloat, will be idle for the period of at least a 
year. The restoration of the pre-war schedules is pro- 
ceeding slowly. 

The present construction program of leading com- 
panies. — "The British lines, plying from Europe to the 
United States, suffered heavy losses. The Cunard line, 
which seems to have been singled out by the submarines of 
Germany, is seeking to build up again its express services 
from the United Kingdom and the Mediterranean to Ameri- 
can ports. In an effort to replace the liners which went to 
the bottom of the Atlantic and the Mediterranean, it has 
inaugurated a building program which includes the con- 
struction of twelve intermediate-sized passenger carriers. 
The Scythia, first of the post-war liners, has just been 
launched, but it will require at least six months more to fit 
her out and make her ready for service. 

"The International Mercantile Marine Company has ad- 
vised that it will rehabilitate its fleet by the building of 
250,000 tons of new ships. The keel for a 33,000-ton vessel 



324 OCEAN SHIPPING 

for the Red Star Line will be laid within the next few weeks, 
and it is anticipated that at least eight new liners, of inter- 
mediate type raging around 20,000 tons, will be constructed. 
However, it will be the summer of 1921 before any of these 
new liners may be expected to assist in the movement of 
immigrants. 

"The two largest Italian lines, Transatlantica Italiana 
and Navigazione Generale Italiana, have placed contracts 
for a total of ten passenger ships which will ply between the 
United States and Italy. Two of the liners which will fly 
the flag of the Navigazione, the Diiilio and Guilio Cesare, 
have been launched, but it is not anticipated that they will 
be in operation before 1921. 

"The Russian-American Line, one of the leading steam- 
ship companies before the Bolshevists gained sway in Rus- 
sia, has disappeared from the seas. The Greek Line, which 
formerly had a fleet of five passenger ships on the route 
from New York to Piraeus, resumed operations with two 
ships last fall, after a three-year suspension. The French 
Line did not feel the submarine campaign to any appreci- 
able extent, in so far as the passenger vessels were con- 
cerned."^ 

But when once put into service this new tonnage has to 
be used, and the necessity of keeping it lucratively employed 
sends hundreds of steamship agents scurrying over the lands 
with surplus populations to keep the stream of human cargo 
flowing. Often they are aided by government and private 
agents, representing the interests of the underpopulated 
countries which hunger for new labor. 

Ocean passenger service originally a by-product of 
freight service. — Ocean passenger service originated 
as a by-product of freight service. It began in a modest way 

'■ From The Annalist— April 12, 1920, p. 500. 



THE MODERN OCEAN LINER 





Courtesy Inieniational Mercantile Marine Company. 

White Star Liner OLYMPIC 



PASSENGER SERVICE 225 

when a few passengers were accommodated in the aftercastle, 
or the poop, where the captain and the navigating officers 
had their quarters, the place of honor on the ship. Here 
they stayed even when steam power supplanted the force 
of the wind, but only as long as side-propeller wheels were 
used. 

The introduction of the screw-propeller made this part of 
the ship the most uncomfortable, because of the noise and 
vibration. It was then that the cabin was moved towards 
the centre of the ship, immediately in front of the steam 
engine. Gradually, the accommodation for passengers en- 
croached more and more upon the cargo-carrying capacity 
of the vessel. This evolution worked along two separate 
lines. In the first place, passenger cabins were built in the 
space where formerly cargo could have been carried, 
although this tendency was counteracted as much as possible 
by building deck superstructures, higher and higher with 
every successive type, until to-day a maximum number of 
ten decks has been reached. But the adaptation of the ship's 
construction to passenger service, which requires greater 
speed, meant an even more serious curtailment of the cargo- 
carrying capacity. Increased speed means more fuel ; more 
fuel means more bunker space, which is available only at.the 
expense of cargo space. But, beyond a certain point, 
increase of speed cannot, economically, be attained by the 
increased use of fuel ; it necessitates a considerable reduc- 
tion of the block coefficient of the hull. Thus, ships of 17 
or 18 knots should hardly exceed 70 percent, and an increase 
of the speed over and above 23 knots means a further loss of 
from 10 to 13 percent, unless the economical side of speed 
production is to be disregarded. 

Load-index affects profitableness. — One of the most 
important considerations regarding the profitableness of 



326 OCEAN SHIPPING 

installing passenger accommodations in freight vessels, has 
been the load index. As we have seen in Chapter II, the 
cargo movements from one country to another are often 
badly balanced. This is particularly true on the all-impor- 
tant North Atlantic route. The exports from North 
America to Europe by far exceed the imports from Europe, 
in point of weight and volume. Here steerage passengers 
offer to the trans-Atlantic steamship companies a welcome 
solution of a difficult problem. Human freight, going west, 
balances the excess cargo going east. It is a serious question 
whether, without these favorable circumstances, steerage 
capacity would have been offered in as large dimensions, or 
whether steerage rates would have been as low as they have 
been. The increase of income, due to the better utilization 
of tonnage space, thus achieved, could be used to defray the 
greater cost of higher speed and more slender build of the 
passenger steamers. Only on this basis could the combina- 
tion vessel enter into competition against the tramp and 
cargo liner, which were operated on a much lower cost basis. 

Evolution of the express steamer. — Parallel to this 
evolution of the combination steamer, grew up another type 
of passenger vessel, namely, the pure passenger express 
steamer. Its paying value is based upon the earnings from 
transporting the most exacting travelling public of the 
earth — American tourists — coupled with the income from 
enormously increased steerage capacity. Only a few vessels 
of this type can exist side-by-side and pay for their invest- 
ment and operating cost. 

The competition of this highest type in turn reacted upon 
the combination vessel, which had to increase its speed more 
and more if all cabin passengers were not to be lost to the 
express steamer. The result was that the speed of the com- 
bination liner gradually increased from 12 to 14 knots to 17 



PASSENGER SERVICE 327 

or 18 knots. The prevailing speed of express steamers 
varies from 21 to 23 knots, while only rare exceptions 
develop a speed of from 24 to 25 knots. 

Different policies pursued by different companies. — 
It is interesting to study how the different steamship com- 
panies have arrived at different conclusions in trying to solve 
this problem of the relative speed, size, passenger and cargo 
accommodations, cabin and steerage accommodations, etc. 
Contenting ourselves with a rough characterization of the 
most important steamship companies serving the North 
Atlantic route, one may say that the Cunard Line has em- 
phasized speed; and the White Star Line comfort and 
luxury. In their latest bids for the leadership in North 
Atlantic travel, the Hamburg-American Line tried to com- 
bine the speed of the Cunarder with the comfort and luxury 
of the White Star Line, without at the same time sacrificing 
the chance of earning a fair sum from the transportation 
of cargo. The chart given on page 272 has given the cargo- 
carrying capacity of the Bismarck as 15,000 tons, the capa- 
city of a very large freighter. 

Different considerations determine the policy regarding 
passenger accommodation on different routes. Thus, the 
almost extravagant display of luxury which marks the latest 
products of the marine architect, created for the North 
Atlantic route, might prove a doubtful asset to a company 
catering to the Australian or South African traveling public. 
It is an interesting speculation whether, in the future, the 
North Atlantic route will hold first rank as regards luxury 
and display. Reports are current that passenger ships are 
to ply between Pacific ports of the United States and 
Hawaii, whose luxury and comfort will outdo anything 
previously offered. Among the ships which the Hamburg- 
American Line had to surrender under the terms of the 



328 OCEAN SHIPPING 

Peace Treaty is the Cape Polonio, which was intended for 
the South American service, and which was the only ship 
providing a private toilet for each stateroom. On the 
other hand, some of the best, largest and most lux- 
uriously equipped liners, formerly plying on the trans- 
atlantic route, have been lost as a result of the war, and a 
policy of retrenchment has, at least temporarily, succeeded 
pre-war orgies of extravagance. 

"Safety first" is slogan. — While the outstanding con- 
sideration controlling the construction of cargo-carrying ves- 
sels is maximum economy, safety is the prime desideratum 
in the case of passenger ships, with speed and comfort — or 
luxury — as secondary factors. The main aim of safety 
devices is the prevention of disaster. In so far, however, as 
all human handiwork is imperfect, the possibility of disaster 
must be included in the calculation of the ship-builder, and 
devices must be installed which reduce to the minimum the 
consequences of a disaster, should such occur. Accordingly, 
safety devices fall into two groups. Among the preventive 
types, the submarine bell and wireless telegraphy, allowing 
constant conversation between steamers approaching each 
other in a fog, and permitting the transmission of warnings 
from ship to ship or from land to ship, have reduced the 
danger of collision to a minimum. In addition to this, ships 
are partitioned by water-tight bulk-heads into a large num- 
ber of compartments, many of which may be flooded with- 
out completely depriving the vessel of its buoyancy. Some 
ships are even provided with a complete outer skin, so that 
each one is a ship within a ship. Double bottoms reduce the 
danger from grounding, and automatic sprinklers and the 
substitution of electricity for gas or oil reduce the danger 
from fire. So we may say that, all along the line, the greatest 
possible safety is being attained within the limits of the 



PASSENGER SERVICE Zl9 

economic possibilities, under prevailing conditions. The 
Titanic disaster has done much to direct the attention of the 
ship-owner and ship-builder to the best distribution and 
installation of life-boats, rafts, and improved davits and 
other devices designed for similar purposes. Indirectly, the 
greatest safety is achieved by scientifically devised ocean 
lanes, careful patrolling of the ocean, improved wreathe* 
reports and better knowledge of currents, winds, etc. 

Comfort of modem liners. — Although size is a power- 
ful aid in the striving towards the achievement of greater 
safety, it is also the foundation of greater comfort. Samuel 
Cunard is recognized as the initiator of the ocean steamer 
mail and passenger service, but Thomas H. Ismay, of the 
White Star Line, commercialized comfort and luxury; it 
was on his boats that gas-lighting first replaced dingy oil 
lamps, that devices were installed for lowering and raising 
the propeller to avoid "racing," and that experiments were 
made with oscillating cabins, designed to overcome the 
justly dreaded mal de mer, the greatest discomfort of ocean 
travel for the majority of people. To-day a novel invention 
is being installed on some ships which is to reduce to a mini- 
mum vibrations from the engine as well as the pitching of 
the ship, due to the motion of the waves — the gyroscope. 
It is hard to draw the line between comfort and luxury, but 
those who have enjoyed a passage on ships like the Olympic, 
Imperator, or Mauretania, know that Roman baths, winter 
gardens, Ritz-Carlton restaurants, swimming-pools, gym- 
nasiums, etc., combine to ofifer to the passenger a sum total 
of diversion and delight which, by far, excel the pleasure 
normally enjoyed on land, even by the most fortunate. This 
is also true of the culinary side of ocean travel. The follow- 
ing list of items which fill the larder of a modern ocean 
steamer at the time of departure, will prove this statement : 



330 OCEAN SHIPPING 

The floating town. — "Every time the Cunard flyers set 
out upon their jourriey, the chief steward stocks his cold 
storage rooms with the carcasses of 40 oxen, 60 lambs, 80 
sheep, 130 pigs and 10 calves, to vanish in the forms of cuts 
from the joint, steaks, chops, cutlets, and what not. Game 
is represented by 2,000 fowls, 400 pigeons, 250 partridge, a 
similar number of grouse, 800 quail, 200 snipe, 100 brace 
of pheasants, 350 ducks, 150 turkeys, and 90 geese. Three 
turtles, each weighing 325 pounds, assist in the concoction of 
soup; while 3,500 pounds of ling, 12 boxes of herring, 60 
boxes of kippers, 12 barrels of red herring, 36 boxes of 
bloaters, 10 boxes of fresh herrings, 1,500 pounds of salmon, 
4 boxes of haddock and 45 boxes of fresh fish, such as 
turbot, sole, plaice, halibut, etc., are stowed away to meet 
the enormous appetites of the passengers." ^ 

With telephone service throughout the ship, such as many 
a community on land might envy, with elevators to connect 
the numerous decks, with brass bedsteads replacing the old- 
fashioned berths, with daily papers printed aboard, reporting 
the latest news received by wireless, the ocean traveler of 
to-day may at times forget that he is not on terra firma but, 
temporarily, a denizen of a floating city. 
- Naturally these advantages are available only for a chosen 
few who can afford the heiavy expense of a first-class 
passage, which, on the best steamers, and for the best accom- 
modations, costs as much as $10,000 a voyage or more. The 
enormous difference between first-class and steerage accom- 
modations is bridged by intermediary accommodations, 
known as second-class, and on some of the most recently 
built mammoth steamers, as third-class. Some recent liners 
have been equipped to carry third-class passengers ex- 
clusively. 

* F. A. Talbot, "Steamship Conquest of the Sea," pp. 114. 115. 



PASSENGER SERVICE 331 

REFERENCES 

FoERSTER, E. Technik der Weltschiffahrt. Part III. (1909). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XIII. (1919). 

Talbot, F. A. Steamship Conquest of the sea. Chaps. VI and IX. 
(1912). 

United Kingdom. Board of Trade. Reports of the Committees ap- 
pointed to consider the position of the Shipping and Shipbuild- 
ing Industries after the war. (London, 1918) 

United States. Department of Commerce. Statistical Abstracts. 
House Committee on the Merchant Marine and Fisheries. Pro- 
ceedings in the Investigation of Shipping Combinations. (4 vols. 
House Doc. No. 80S. 63 Cong., 2 Sess. (1914), 



CHAPTER XVII 
MAIL AND EXPRESS SERVICE 

Prerequisites of mail and express service — Speed and 
regularity, qualities which mark the passenger liner, are 
likewise the prerequisites of the mail and express serv- 
ices. Of these, the mail service is by far the most im- 
portant, both in volume and in the variety of functions 
performed. Throughout the civilized world the postal 
service has become a government function. The carrying 
of mail, therefore, is one of the services rendered by the 
steamship lines which brings them into working contact 
with the governments of countries making use of ocean 
steamships. In some cases, mail payments to steamship 
companies have served, and still serve, as veiled sub- 
sidies. This phase of the problem will be discussed in 
a later chapter. 

Volume of mail traffic. — The volume of mail traffic is 
a general index of the standard of civilization reached or 
in other words, the volume of mail which enters and 
leaves a country is a measure of the extent to which 
that country's commercial and cultural affairs are linked 
up with the similar interests of the rest of the world. In 
as much as England, because of her insularity, is to a 
higher degree dependent on outside sources and foreign 
markets than probably any other country of the world, 
one might expect England to lead in the use of ordinary 
international mails. But, in point of population, Eng- 
land is considerably outclassed by the United States and 
Germany. It is, therefore, not surprising that during 
the last years before the war, Germany and the United 

332 



MAIL AND EXPRESS SERVICE 333 

States alternated in the world's leadership as users of 
the ordinary international mails. In 1913, the last normal 
year before the world war dislocated international ex- 
change, Germany received 406,387,250 ordinary letters, 
cards and small pieces, and dispatched 389^243,030 ; while 
the United States received 350,881,710, and dispatched 
384,698,607. Great Britain's mail was 230,307,000 pieces 
in, and 326,024,300 pieces out. Naturally not all of the 
foreign mail of the United States and of Germany is 
overseas mail. 

"Consignee's mail." — The bulk of foreign mail is 
carried by specially appointed mail steamers, the one ex- 
ception being the so-called consignee's mail, or ship's 
letters, which may be carried by any steamer. This mail 
may consist only of such communications as relate to 
the shipments on a particular vessel. No postage stamps 
should be attached to the envelope, which should be 
prominently marked "consignee." The inclusion of any 
other matter may result in the rejection of the entire 
comunication.^ All other postal communications and 
shipments are under the agreement of the Universal 
Postal Union. 

Principles governing classification of mail. — The classi- 
fication of mail matter does not follow the same princi- 
ples which govern the classification of freight. In 
classifying the latter, the main idea is to arrive at a sys- 
tem whereby the maximum traffic is accommodated at 
the maximum revenue. The aim of the government postal 
service is not profit, but the promotion of public intelli- 
gence and the convenience of business. Therefore, the 
postage charge for different services performed is not 

'' See Exporter's Encyclopedia, p. 173. 



334 OCEAN SHIPPING 

adjusted to the cost of its services, but calculated so as 
best to accomplish this aim. 

Different methods of paying for ocean mail service. — 
Different methods prevail for paying steamship com- 
panies for the carrying of United States ocean mail. 

(1) By contract based upon the length of the route 
and speed of the vessel. 

(2) By payment based upon the amount of postage 
received by the United States from the mail 
carried. 

The contract service is based upon the law of March 3, 
1891 ; entitled AN ACT to provide for ocean mail ser- 
vice between the United States and foreign ports and to 
promote commerce. This Act is superseded by the Mer- 
chant Marine Act, 1920, section 24 (see Appendix and 
Chapter XXX). There have been no changes as yet under 
the Act of 1920 so that the Act of 1891 still governs. Under 
this Act the Postmaster General may, after inviting bids, 
enter into contracts for terms of from five to ten years with 
American citizens for carrying mails on American steam- 
ships between the United States and foreign countries, with 
the exception of Canada, the several services "to be equitably 
distributed among the Atlantic, Mexican Gulf, and Pacific 
ports." One of the aims of the legislators in passing the Act 
of 1891 was the promotion of the American merchant 
marine. The building of large passenger vessels in Ameri- 
can yards was to be encouraged. A premium was put on 
speed and modern methods of construction. The Act 
therefore specifies four classes of contracts, which provide 
compensation which varies with the character of the 
construction, tonnage and speed of vessel, as follows-* 



MAIL AND EXPRESS SERVICE 



335 





Steamships 


Maxi- 
mum 


Classes 


Construction 


Mini- 
mum 
Speed 


Minimum 

Gross 
Tonnage 


Compen- 
sation 
per Mile 


Class I 


Iron or Steel 

Iron or Steel 

Iron or Steel 

Iron, Steel or Wood 


Knots 
20 
16 
14 
12 


Tons 
8,000 
5,000 
2,500 
1,500 


4.00 


Class II 


2.00 


Class III 


1.00 


Class IV 


.661^ 





All vessels except those of Class IV must be constructed 
under the supervision of the Naval authorities and must 
be built for use as auxiliary cruisers in time of war. 
Vessels of all classes must, moreover, be built in Ameri- 
can yards. An exception was allowed in the case of the 
American Line, which secured a Class 1 contract for a 
service to England and which was granted, by act of 
May 10, 1892, American registry for two foreign-built 
vessels on condition that two others of equal size and 
speed should be built in American yards. 

Not only must the ships be built in American yards 
and owned by American citizens, but they must be 
officered by Americans and manned by crews of whom 
Americans shall constitute at least one-fourth during the 
first two years, one-third during the next three years, 
and one-half during the remainder of the contract. It is 
interesting to note that the steamers operated under the 
mail subsidy act of 1891 are the only American vessels 
that are required to carry American crews. 

Mail contracts under the law of 1891. — The table on 
page 336 shows the amounts actually expended annually for 



336 



OCEAN SHIPPING 



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MAIL AND EXPRESS SERVICE 357 

each contract mail service subsidized under the act of 
March 3, 1891, in the period from 1892 to 1915." * 

On March 3, 1917, a supplementary statute was in- 
serted into this act which empowered the Postmaster 
General "to contract with American citizens for transport- 
ing mail between the United States and Great Britain in 
American-built vessels of not less than 35,000 tons gross, 
and having a speed of not less than 30 knots per hour, at 
a compensation not exceeding $8 per mile for each out- 
ward voyage." The conditions of this new statute are so 
exacting that probably considerable time will elapse be- 
fore ships will be capable of earning this compensation. 

As appears from the table given on page 336, the American 
Line was then by far the most important contract mail 
carrier, receiving more payment than all the remaining 
lines taken together. This has entirely changed. For in 
the Fall of 1920 the mail contract with the American lapsed 
and was not renewed. The details of the story are rather 
interesting : 

There is imfeigned disappointment in American shipping 
circles at the announcement that the American Line's con- 
tract for the carrying of the mails between the United States 
and Great Britain will not be renewed. The original contract 
has been in force twenty-five years, and the failure to re- 
new it has unpleasantly emphasized our lack of fast vessels. 
The necessities of the mails demand that none but the fast' 
est ships shall be used to carry them. 

At $4 a mile, the rate of the American Line's mail con- 
t-£.ct under the Act of 1891, there has latterly been a loss 
on the bi: iness. The mails have averaged about 2,500 sacks 
a steamer. On the basis of 80 cents a pound, the rate now 
being paid, the revenue to the steamship company would be 
* Grosvenor M. Jones, Government Aid to Merchant Shipping, p. 41. 



338 OCEAN SHIPPING 

from five to ten times as much as under the $4-a-mile rate.' 
Basing payment on amount of postage. — ^The second 
method of paying steamship companies which carry 
ocean mail is based upon the amount of postage received. 
Among the steamship companies receiving payment 
under this arrangement, foreign companies have been 
very prominent, as is shown by the table on page 339, 
which gives the amounts received by the most important 
American non-contract and foreign lines, in the years 
1911-1914: 

The payments granted under the act of 1891 to con- 
tract steamers had been far in excess of the amount which 
the government would have had to pay on a non-contract, 
weight basis, although even the rate of 80 cents a pound 
for letters and postcards, and 8 cents a pound for other 
articles, received by non-contract steamers flying the 
American flag, is far in excess of Universal Postal Union 
rates, particularly when the present exchange rate is 
taken into consideration. In recent years the tendency 
on the part of the United States Post Office Department 
has been to divert as much mail as possible from non- 
contract lines and to make the fullest possible use of the 
service rendered by contract liners. This has resulted 
in considerable saving to the Post Offi.ce Department — 
as appears from the following statement made by the 
Second Assistant Postmaster General in his annual re- 
port for 1915: 

Policies of the United States Post Office Department. 
— "The total cost of the contract service was $1,096,- 
209.93, which is $90,709.11 less than the amount that 
would have been allowable at the present rates to the 
conveying steamers if they had not been under contract 

1 From Nautical Gazette, Oct. 23, 1920. 



MAIL AND EXPRESS SERVICE 



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340 OCEAN SHIPPING 

and had conveyed the same mails. In considering the 
cost of the contract service, it should be borne in mind, 
however, that during the year foreign closed mails, 
amounting to 135,093,083 grams (297,880 pounds) of 
letters and post cards, and 429,717,543 grams (947,527 
pounds) of other articles, the conveyance of which in 
the ordinary course would have cost the department at 
the rate of four francs a kilo for letters and post cards 
and 50 centimes a kilo for other articles, a sum amount- 
ing to $145,759.60, were dispatched by the contract 
steamers without additional cost to the department. The 
net result, therefore, is that the contract service cost 
$236,468.71 less than if the conveying steamers had not 
been under contract but had been paid on the basis of 
the weights of the mails at the rates regularly allowed 
to steamers of United States registry not under contract. 
In considering this subject it should be borne in mind 
that the fiscal year of 1914 was the first in the more than 
twenty years of service under the act of 1891 that the 
cost of the contract service was less than the conveying 
steamers would have received on the weight basis for 
conveying the same amount of mail. The economy 
eflfected by utilizing the contract steamers to the fullest 
extent possible can be readily appreciated when it is un- 
derstood that all mail not dispatched by the contract 
steamers must be dispatched by non-contract steamers, 
and its conveyance paid for on the weight basis, while 
the increasing weight of the mail dispatched by the con- 
tract steamers does not increase their pay, which is on 
the mileage basis." 

Sea post-offices. — Additional expense is incurred by 
maintaining sea post-offices on a number of steamers 
which bring foreign mail to this country and which are 



MAIL AND EXPRESS SERVICE 341 

supposed to expedite the assorting of this mail prior to 
the arrival of the steamer. There is also the item of ex- 
pense connected with the United States postal agencies 
at Shanghai and Vera Cruz. The maintenance of the 
International Postal Union at Berne, Switzerland, and a 
number of minor items help to swell this cost. 

Steamship lines conveying Ujtiited States mail. — The 
principal steamship lines which conveyed mails to Europe 
during the fiscal year of 1920 are the following: Holland 
America, French Line, Cunard Line, American Line, Red 
Star Line, White Star Line, Swedish-American, Norwegian- 
American, Kerr Steamship Co., Baltic- American, Scandi- 
navian-American and Anchor Line; to the West Indies; 
Mexico and Central and South America, the following: 
New York and Porto Rico Steamship Co., Red D Line, New 
York and Cuba Mail Steamship Co., Royal Netherlands 
West India Mail Steamship Co., Panama Railroad Steam- 
ship Co., Clyde Line, Quebec Steamship Co., United Fruit 
Co., Bull Insular Line, The Munson Line, Pacific Steam 
Navigation Co., The Gray Steamship Co., The Lamport & 
Holt Steamship Co., Norton Steamship Co., The Booth 
Steamship Co., The Cuyamel Fruit Co., Bluefields Fruit & 
Steamship Co., Gulf Navigation Co., New Orleans & South 
American Steamship Co. ; and the principal Steamship Lines 
conveying mails to the Orient were as follows : The Oceanic 
Steamship Co., The Union Steamship Co., China Mail 
Steamship Co., The Pacific Mail Steamship Co., The Toyo 
Kisen 'Kaisha, Osaka Shosen Kaisha, Admiral Line, Nippon 
Yusen Kaisha, Canadian Pacific Steamship Co., The Blue 
Funnel Line, and The Canadian-Australian Line. 

In this connection, it may be well to add that during the 
fiscal year 1920, and for the first time in many years, the 
amount paid for the conveyance of United States mails to 
foreign countries by steamers of American registry exceeded 



342 OCEAN SHIPPING 

the amount paid steamers of foreign registry for the con- 
veyance of such mails. Since June 30, 1920, there have 
been some additions to the lines of steamships available for 
the transportation of foreign mails such as the United States 
Mail Steamship Company, the United American Line and 
the Luckenbach Line from New York for Europe ; and the 
North China Line from the Pacific Coast for the Orient, all 
of the steamers operated by these lines being under Ameri- 
can registry. 

International parcel post. — A phase of the foreign mail 
service which has only recently gained the significance 
which it deserves, is the international parcel post service. 
The transmission of first, second and third class matter 
serves foreign trade indirectly, while through the send- 
ing and carrying of parcels, the post-office becomes a 
direct agent in the exporting and importing of com- 
modities. 

Foreign countries have given this method of reaching 
foreign customers much closer attention than has the 
United States. France is generally regarded as the lead- 
ing country conducting exportations to distant lands by 
post. It is estimated that during the years preceding 
the war, almost 1/10 of all French exports moved 
through this channel. Thus, in 1913, more than 113 
million dollars worth of goods were distributed from 
France all around the world by parcel post; over seven 
million parcels carrying these goods. This predom- 
inance of France is largely explained by the peculiar 
character of French commerce which lends itself par- 
ticularly well to mail order business methods. Her ex- 
ports consist largely of articles of luxury distributed by 
the famous costumers, shoemakers, milliners, perfumers, 
jewellers and department stores of Paris. 



MAIL AND EXPRESS SERVICE 343 

England's excellent parcel post connections. — England 
also has attached great value to this method of dis- 
tributing her wares to foreign markets. Her parcel post 
packages increased in number from 4,637,902 in 1913, 
valued at 45 million dollars, to 6,964,902 parcels with a 
valuation of 66 million dollars, in 1915. In 1916 it prob- 
ably exceeded 90 million dollars. The extent of Eng- 
land's parcel post business is largely due to her wonder- 
ful connections throughout the world and to the low 
rate at which the service is performed. Especially im- 
pressive is England's colonial parcel post, which naturally 
operates under the most favorable circumstances. Rates 
are low, insurance is complete, a C.O.D. system pre- 
vails, and a great bulk of parcels gathered together in a 
special shipping office in London, assorted by established 
routes and packed into inexpensive hampers, boxes, and 
crates, appears to be a commerce by itself.^ 

This country has been somewhat slow in realizing the 
value of this foreign merchandizing method. This is 
due partly to the nature of our foreign trade, partly to 
the competition of private express companies. Indeed, it 
was through the American Express Company that 
foreign countries distributed their parcel post in the 
United States before our own parcel post system was 
sufficiently developed. Vice versa, at least one American 
mail order house of international fame utilized the su- 
perior parcel post connections of England by sending 
consolidated shipments of parcels by freight or express 
to Liverpool. The method was described before the 
Third National Foreign Trade Convention by the export 
manager of the firm, as follows : 

* The Americas, December, 1916, pp. 1-5, 



344 OCEAN SHIPPING 

American mail order houses handicapped. — "By reason 
of the volume of our business, we have been able to per- 
fect an arrangement whereby we forward to Liverpool 
three times a week, a bale of packages already wrapped 
and addressed to places with which the United States 
has no parcel post. At Liverpool the bale is opened and 
the parcels deposited in the British post by our agent. 
This arrangement gives us an advantage over casual 
shippers, who must rely upon the high charges and tin- 
satisfactory services of the forwarding concerns." ^ 
Special arrangements are now made to facilitate onward 
transmission from England and France.^ 

The same authority stated that in 1919, the United 
States had parcel post connections with 74 countries, as 
against 195 countries and colonies enumerated in the 
British postal guide.' The importance of parcel post con- 
nections appears from the table on page 345, which shows 
the comparative cost of sending packages of 3, 7, and 11 
pounds by express and iirst class mail from Chicago, and 
by parcel post from London to seven selected cities. 

* Report on Third National Foreign Trade Convention, p. 317. 

^ See Supplement to Postal Bulletin No. 12156. 

' Since the arrangements have been made with Roumania and 
Lithuania, the weight limit in the case of these two countries being 
twenty-two pounds, and to Spain (including the Balearic Islands, the 
Canary Islands, and the Spanish possessions in Northern Africa), 
British East Africa and Uganda, Trentino and Trieste, Belgian Congo, 
Bismark Archipelago, Gilbert and EUice Islands, Nauru Island and 
Solomon Islands, Portuguese East Africa, Northern Rhodesia, Southern 
Rhodesia, the Southwest Africa Protectorate and Czecho Slovakia, 
Bulg3,ria and Poland, the weight limit in each case being eleven pounds; 
the weight limit of parcels for Argentina, Costa Rica and Paraguay has 
been increased to twenty-two pounds, the weight limit of packages to 
Panama has been increased to fifty pounds, and parcel-post service has 
been resumed to Austria and Germany, the limit of weight being eleven 
pounds. 

(From letter of Second Assistant Postmaster General, April 23, 
1920, to the Author.) 



MAIL AND EXPRESS SERVICE 



34S 



COMPARATIVE TRANSPORTATION CHARGES FROM 
UNITED STATES AND ENGLAND TO REPRE- 
SENTATIVE FOREIGN PORTSJ 



Charge for 3 Lbs. 
From Chicago 



Express 



1st Class 
Mail 



From 

London 

Parcel 

Post 



To— 

Madrid 

Calcutta 

Singapore 

Suva 

Durban 

Lagos 

Johannesburg 



$4.33 
2.12 
2.32 

13.57 
4.33 

15.40 
*15.40 



$1.56 
1.56 
1.56 
1.56 
1.56 
1.56 
1.56 



$0.36 
.24 
.24 
.40 
.84 
.36 
.84 



Charge for 7 Lbs. 
From Chicago 



Express 



1st Class 
Mail 



From 

London 

Parcel 

Post 



To— 

Madrid 

Calcutta 

Singapore 

Suva 

Durban 

Lagos 

Johannesburg 



$6.94 
3.46 
3.46 

13.97 
6.94 

15.50 
*15.50 



$3.48 
3.48 
3.48 
3.48 
3.48 
3.48 
3.48 



BO. 44 
.48 
.48 
.80 

1.20 
.60 

1.20 



Charge for 11 Lbs. 
From Chicago 



Express 



1st Class 
Mail 



From 
London 
Parcel 

Post 



To— 

Madrid 

Calcutta 

Singapore 

Suva 

Durban 

Lagos 

Johannesburg . 



$8.54 
4.88 
4.88 

14.38 
8.54 

15.60 
*15.60 



$5.40 
5.40 
5.40 
5.40 
5.40 
6.40 
5.40 



$0.52 

.72 

.72 

1.20 

1.80 

.84 

1.80 



•Express to Cape Town only. 

'■ Sixth National Foreign Trade Convention Report, p. 439. 



346 OCEAN SHIPPING 

Apart from the fact that the parcel post connections of 
this country are inadequate, the principle governing the 
operation of the parcel post is frequently criticized. 

Deficiencies of American system. — In the first place, 
fault is found with the uniform rate charge of 12 cents 
per pound, applying to packages of from 1 to 20 pounds 
The English system is considered by experts to be 
superior because it allows for a more minutely devised 
decreasing scale. Furthermore, our. parcel post service 
is bare of certain important features which are necessary 
to a fully successful operation. The American exporter 
cannot insure his parcels and cannot send them C.O.D. 
In both these cases he is handicapped when compared 
with his European competitors. One of the important 
items which render parcel post shipments so attractive 
to exporters is the general freedom from the require- 
ments of officially vised consular documents, the cost of 
which would be prohibitive to the sending of many 
small packages. In many respects the parcel post is 
also preferable to shipping packages on "parcel receipts." 
This method is used when the minimum bill of lading 
offered by steamship companies is too high to warrant 
the shipment. Under the "parcel receipt" the responsi- 
bility of the steamship company is much less than under 
a bill of lading. Its use is primarily designed by the 
steamship company to enable the export shipper to get 
his samples to prospective buyers abroad at a small 
cost. The use of "parcel receipts" is limited to small 
packages of little value and is not universal among 
steamship companies.' 

Growth of American parcel post shipments abroad. — 
In spite of the limitations which as yet mark the Ameri- 

* It is to be admitted that the American parcel post service is 
rapidly being improved. 



MAIL AND EXPRESS SERVICE 



347 



can foreign parcel post service, it is enjoying increasing 
popularity as the following figures prove: 

WEIGHT OF PARCEL POST PACKAGES DISPATCHED TO 
FOREIGN COUNTRIES, IN THE YEARS ENDED JUNE 30, 
1918 AND 1919, WITH PERCENTAGES OF INCREASE 
OR DECREASE AS COMPARED WITH THE PRE- 
CEDING YEAR, BY COUNTRIESi 



Country. 



Dispatched. 



Weight. 



1918 



1919 



Increase(+) or 
decrease ( — ). 



191S 



1919 



Africa* 

Argentina 

AustraUa 

Bahamas 

Barbados 

Belgium^ 

Bermuda 

Bolivia 

Brazil 

British Guiana 

British Honduras 

Chile' 

China 

Colombia 

Costa Rica 

Curagao 

Denmark* 

Dominican Republic. . 

Dutch Guiana 

Ecuador 

France _ 

French colonies. . ; . . . 

Gibraltar 

Great Britain'' 

Greece' 

Guatemala 

Haiti 

Honduras 

Hongkong 

Iceland' 

Italy 

Jamaica 

Japan 

Leeward Islands 

Liberia 

Luxemburg^ 

Mexico 

Netherlands* 

Netherlands colonies'. 

Newfoundland 

New Zealand 

Nicaragua 

Norway'" 



Pounds. 



124,729 

549,511 

21,818 

52,590 



26,338 

178,979 

239,905 

30,250 

22,433 

242,360 

178,503 

633,721 

74,070 

29,328 



118,059 

4,122 

243,941 

1,099,765 

15,837 

6,401 

4,128,638 



187,078 
34,677 

176,932 
46,453 



1,320,166 

112,720 

695,045 

36,168 

2,772 



1,950,707 



14,233 

28,947 

262,711 

90,074 



Pounds. 

9,937 

249,727 

1,218,787 

14,699 

61,246 

176,100 

'49,866 

287,917 

330,318 

37,252 

23,838 

20,507 

220,155 

650,027 

88,182 

27,019 

11,677 

147,364 

7,253 

252,953 

1,025,942 

28,165 

21,288 

4,159,288 

28,656 

263,519 

46,067 

201,420 

97,303 

517 

1,116,219 

109,899 

1,099,071 

38,860 

1,215 

250 

2,980,790 

2,105 

43,571 

28,652 

493,827 

101,014 

15,513 



+ 


10 


29 


+ 97 


46 




22 


46 


— 


19 


41 



— 29.46 
+ 12,45 
+ 73.60 
+ 32.36 
+ 8.64 

— 25.78 

— 41.05 

— 16.24 

— 46.55 
+ 6.38 

■+'i3!34 

— 26.73 

— 4.76 
+244.30 
+128.10 
+218.77 
+117.46 



— 12.40 


+ 5.37 


+ 16.02 


+ 60.69 



+160.91 
+ 6.52 
+ 61.59 

— 1.13 

— 9.97 

'+i3i.'82 



— 33.06 
+ 70.48 

— 12.91 



Per ceni. 

"+i66'27 
+121.79 

— 32.63 
+ 16.46 

"+'89.'33 
+ 60.87 
+ 37.69 
+ 23.15 
+ 6.26 

— 91.53 
+ 23.33 
+ 2.57 
+ 19.05 

— 7.86 

"+'24'82 
+ 75.95 
+ 3.69 

— 6,71 
+ 77.84 
+232.57 
+ .74 



+ 40.86 


-- 32,85 


■- 13.84 


+109.47 



— 15,45 

— 2,50 
+ 84.70 
+ 7.44 

— 56.17 

'+'52,'86 

'+206! is 

— 1.02 
+ 87,97 
+ 12.15 



1 From Statistical Abstract of the United States, 1919, p. 315. 

Table continued on p. ^48 



348 



OCEAN SHIPPING 



WEIGHT OF PARCEL POST PACKAGES DISPATCHED TO 
FOREIGN COUNTRIES, IN THE YEARS ENDED JUNE 30, 
1918 AND 1919, WITH PERCENTAGES OF INCREASE 
OR DECREASE AS COMPARED WITH THE PRE- 
CEDING YEAR, BY COUNTRIES 

(Continued from p. 34."/) 





Dispatched. 


Country. 


Weight. 


Increase (+) or 
decrease ( — ). 




1918 


1919 


1918 


1919 




Pounds. 
94,841 


Pounds. 

107,903 

361 

677,977 

54,103 

129,776 

30,724 

44,178 

1,519 

86,685 

164,938 

16,992 


Per cent. 
+ 9.10 

■■+'45.' 74 


Per cent. 
4- 13 77 








495,030 

7,913 

99,771 


+ 36.96 
+583.72 
+ 30.07 


Portugal" 




— 2.99 


Sweden* 


Trinidad ; 


38,010 


+ 4.86 


+ 16.23 






45,625 

163,845 

15,225 


+ 29.74 
— 1.47 
+ 3.63 


+ 89.99 
+ .67 
+ 11.60 




Windward Islands 




Total 


13,840,266 


17,102,131 







'Service commencing Aug. 12, 1919. 
'Service resumed Jan. 27, 1919. 
'Service suspended Jan. 1, 1918, and re- 
sumed May 14, 1919. 
'Service resumed May 7, 1919. 
'Including Samoa. 
•Service resumed Feb. 3, 1919. 



'Service commencing Mar. 1, 1919. 

'Service commencing April. 23, 1919. 

'New service. 
'"Service resumed Apr. 19, 1919. 
''Service commencing Apr. 30, 1919. 
"Service commencing Oct. 10, 1917, 



"Notwithstanding the interruptions to the inter- 
national parcel post service due to the war, the weight 
of the parcel post mails dispatched during the years 
1918-1919 was 17,102,131 pounds, or an increase of 23.57 
per cent, over the previous year; of which 7,218,186 
pounds represent the weight of the parcel mails dis- 
patched to Mexico, Central and South America, an in- 
crease of 1,112,234 pounds, or 18.22 per cent, over the 
parcel mails dispatched to said countries during the 
preceding year."* 



1 Annual Report of Postmaster General for year ending June 30, 
1919. 



MAIL AND EXPRESS SERVICE 349 

International express business. — Much of this increase 
in the parcel post business has been at the expense of the 
express service, which is performed by rival express 
companies. In view of the fact that diflferent 
advantages attach to the two methods of shipping 
packages, a certain division of labor is taking place. 

The international express business began in 1840, when 
Harnen & Company, the firm which later developed into 
the Adams Express Company, established its agencies 
in the leading cities of Great Britain, France and Ger- 
many. From the start other questions besides the hand- 
ling of packages stood in the foreground. When Harnen 
& Company gave up the express business proper, other 
American express companies had their turn, until only 
four companies remained in the field, namely : the Amer- 
ican, the United States, the Wells-Fargo and the Adams. 
In 1914 the United States Express Company ceased to 
exist and when during the war the domestic express was 
merged into "The American Railway Express Company," 
the American Express Company continued alone in the 
foreign field and the express business proper of even 
that concern is referred to as "negligible" by their 
foreign trade manager: "The major business in foreign 
countries is financial in character, including operation 
in foreign exchange and particularly the financing in all 
fashions of export and import shipments, as well as the 
primary activity of travel financing through traveler's 
checks and letters of credit." * 

But the international express service is not confined to 
the companies supporting this work in the domestic field. 
Large and well-ordered express and freight forwarding 
concerns are located in our seaport cities. 

1 Quoted from letter to the author. 



3S0 OCEAN SHIPPING 

REFERENCES 

American Express Company. Various Publications. 

Exporters' Encyclopedia. {Annual). 

Hough, B. O. Ocean Traffic and Trade. Chap. IX. (1915). 

Practical Exporting. Chap. XII. (1915). 
Johnson and Huebner. Principles of Ocean Transportation. Chaps. 

XIV and XV. (1919). 
National Foreign Trade Council. Ocean Shipping. (1917). 
National Foreign Trade Conventions. Annual Reports. 
United States. Department of Commerce. Statistical Abstracts. 

Department of Commerce, Bureau of Foreign and Domestic 

Commerce. Government Aid to Merchant Shipping. Special 

Agents' Series No. 119. (1916). 

Post Office Department. Annual Reports. 



PART VI 
MARINE INSURANCE 



351 



CHAPTER XVIII 
CLASSIFICATION AND REGISTRY OF SHIPPING 

Ship classification the basis of hull insurance. — Modern 
marine transportation and international trade would be 
utterly unthinkable without marine insurance, that is, 
roughly speaking, insurance of both the ship and the 
cargo against the manifold perils of the sea. This in- 
surance, in turn, would be a most cumbersome under- 
taking without the preliminary work of our great classifi- 
cation societies. While ships were small in size, simple 
in construction and equipped with but the most neces- 
sary apparatus and rigging, the business of estimating 
the risk was a relatively simple one. It grew in com- 
plexity and in volume with the development of shipping fol- 
lowing the great discoveries. It was during that period 
that the early beginnings of ship classification and reg- 
istry are to be found. 

Beginning of Lloyd's. — The early history is identified 
with the name "Lloyd," which to this day has remained 
the best known in the marine insurance and ship classifi- 
cation world, although the former position of monopolis- 
tic control has had to or will soon have to give way under 
the pressure of competition, to one where Lloyd's may 
be considered as primus inter pares. 

It is one of the romances of history that Edward Lloyd, 
the humble owner of a London coffee house, should per- 
petuate his name through two powerful organizations known 
throughout the world. The practice of merchants, ship- 
owners and underwriters meeting in coffee houses in an 
informal way had originated in Constantinople and had 

353 



3S4 OCEAN SHIPPING 

spread throughout the trading centres of the continent, 
finally leaping across the channel. The shrewd proprietor 
of the coffee house knew well that it was not only the coffee 
which attracted his guests but rather the opportunity of ob- 
taining marine intelligence. So he decided to furnish this 
also. At first this information took the form of handwritten 
notices regarding the movements of ships and particulars as 
to their build and equipment. By 1696, it had developed 
into the Lloyd's News, which appeared three times a week, 
was suspended for a while, and reappeared in 1726 under 
name of Lloyd's List. This Lloyd's List, for the first 
time, offered in printed form quite complete information 
regarding the classification of ships, on the basis of hull con- 
struction, condition of the hull, condition of equipment, etc. 
The information was given out for the exclusive use of sub- 
scribers. In the oldest copies known, those of 1764, 1765 
and 1766, we find thirteen columns in which, with the use 
of characters for the hull and numerals for the equipment, a 
very satisfactory idea of the vessel and its condition is con- 
veyed. While to-day the certificate of classification serves 
many interests — it is the builder's receipt, the owner's guar- 
antee, the underwriter's authority and the shipper's business 
guide — during the seventeenth and eighteenth centuries the 
classification served almost exclusively the interest of the 
marine underwriters. Incidentally the information also 
became valuable to ship purchasers in cases where the ship 
happened to be in a distant port and could not be inspected 
by the buyer. 

Shipbuilders abuse classification records. — However, 
towards the end of the eighteenth century, the shipbuilders 
took an intense interest in "Lloyd's List," much to the detri- 
ment of that publication. Under the pressure brought to 
bear by the shipbuilders of the Thames, the former impar- 



CLASSIFICATION AND REGISTRY 3SS 

tial method of ship classification was supplanted by one 
arbitrarily based on the locality where the ship was con- 
structed. Ships built in a Thames yard were given 
undeserved preference over those turned out in other ship- 
building centres of the United Kingdom. This injustice 
aroused the injured parties to take measures of self-defense. 
So, in 1799, shipowners issued the "Red Book"—~i\it. exact 
title of which was "The New Register Book of Shipping" — 
to compete with Lloyd's "Green Book." These two rival 
publications existed side by side until 1834, in which year 
they were amalgamated and a new committee of twenty- 
four members was entrusted with the management, con- 
sisting in equal shares of merchants, shipowners and under- 
writers. A paragraph was expressly inserted into the by- 
laws which pledged the new organization to base the classifi- 
cation of ships only upon their real and intrinsic qualities as 
fixed by a committee on the basis of reports of the surveyors. 
This did away once for all with the arbitrary decisions of 
individual surveyors and put an end to the unjust system 
of basing ship classification on the locality of shipbuilding. 

In 1870 the present system of classification was adopted 
which assigned as the highest classification mark, lOOA.l, 
the A referring to the hull, the 1 to the equipment and the 
100 serving as a basis of comparison in judging the condi- 
tion of hull and equipment at a given moment. 

Mr. PlimsoU's load-line agitation creates a rival. — An- 
other important event in the history of Lloyd's is connected 
with the load-line agitation which began in the '70s. At that 
time Mr. Samuel Plimsoll started a crusade against what he 
called "coffin ships" — ships overloaded and over insured, the 
destruction of which meant more to their owners than their 
safe arrival. 

In spite of the report submitted in 1874 by a Royal Com- 



356 OCEAN SHIPPING 

mission under the pressure of public opinion, the Board of 
Trade required that on each ship should be clearly marked 
the line up to which the vessel might be safely loaded. This 
load-line is known as the "PlimsoU Line." Lloyd's began 
to issue reserve buoyancy and free board tables which 
became very valuable in determining the load-line ; but when, 
in 1890, the Merchant Shipping Act was about to confer 
upon Lloyd's the monopoly of load-line fixing, the ship- 
builders of the Clyde started an agitation which resulted in 
that year in the creation of the British Corporation for the 
Survey and Registry of Shipping. This corporation was 
then given joint authority with Lloyd's to perform this im- 
portant duty. Lloyd's, realizing the feeling rampant in the 
outlying shipping districts, wisely warded off trouble by a 
far-reaching reorganization which found its expression in 
the formation of the Committee qf Seventy-two — at present 
entrusted with the management. This committee is com- 
posed of twenty-six members elected by the maritime inter- 
ests of London, ten by Liverpool, eight by Glasgow, eighteen 
by other ports, and eleven by shipbuilding, marine engineer- 
ing and structural steel manufacturing interests. 

The process of ship classification. — The process fol- 
lowed in according a vessel classification and registration is 
described by Prof. A. W. 'Kirkaldy as follows : 

"The general process by which classification and registra- 
tion are accorded to a given vessel is that in the first instance, 
when the builder's plans have been drawn, they are sub- 
mitted to the headquarters of the Registry. If the plans are 
found satisfactory they are passed and the work of con- 
struction can proceed forthwith. 

"Sometimes, however, modifications are suggested, or ex- 
planations are required as to certain points, and some 
amount of negotiatioAs may be necessary before the plans 



CLASSIFICATION AND REGISTRY 357 

receive official sanction. The steel of which the ship and 
boilers are to be constructed is manufactured under survey, 
and must pass the tests prescribed in the regulations. Fit- 
tings, including forgings for various purposes, the anchors, 
cables, etc., must all be manufactured according to rule and 
under the inspection of the official surveyors. These offi- 
cers are found not only at the steel works and forging estab- 
lis(hments of the United Kingdom, but also on the continent 
and in America. The completed vessel is therefore built and 
equipped under the direct control of the Registry, which 
assigns a class according to the standard of construction. 
But the work of the Registry is not only concerned with the 
construction of a vessel, but with her upkeep throughout her 
career, or at least throughout the period she remains on the 
Register. Thus there are periodical surveys. There are 
three special surveys during the first twelve years of a ship's 
life, one every four years, and each more exacting than the 
last. These special surveys are technically known as num- 
bers 1, 2 and 3. Moreover, should a ship sustain an accident, 
or require repairs during these periods, the work must be 
carried out according to the requirements of the official sur- 
veyors. A steamer's boilers are under even more complete 
supervision, if that be possible. All marine boilers, after 
being at work six years, must be surveyed at least once a 
year. For a ship to hold a high class on a recognized Reg- 
ister is thus a proof of her seaworthiness, and affords to 
shippers and underwriters alike a guarantee without which 
it would be difficult indeed to carry on business.'" 

The annual report of Lloyd's Register. — The annual 

report of Lloyd's Register is always a source of valuable 

information, but the first report to appear after the close of 

the war possessed even more than the usual value. It covers 

*Kirkaldy, British Shipping, pp. 238-239. 



358 OCEAN SHIPPING 

not only the operations of the Society during the year 1918- 
1919, July to June, but it presents a general survey of the 
work carried on during the war. It reveals the enormous 
expansion of shipbuilding throughout the world and shows 
that on the whole, the oldest classification society has lived 
up to its reputation. At the end of June, 1919, 4,766,623 
tons were being built under the inspection of the Society. 
Of these, 2,033,319 tons were built in the United Kingdom. 
The staff had to be considerably enlarged, particularly in the 
United States, for two reasons. In the first place, the ship- 
building capacity of this country was increased from an 
average pre-war rate of 200,000 gross tons a year, to 
3,500,000 gross tons. Secondly, the officials of Lloyd's were 
entrusted with the inspection and testing of war material 
which was being produced in this country for the account of 
the British Government. It meant that the number of the 
Society's surveyors in America had to be increased from 
22 before the war to 124 in 1918. Besides this, a special 
American Committee of the Register was established in 
New York. 

The introduction to the first volume of the report tells, 
in a concise form, of the numerous and far-reaching changes 
which have taken place during the war, such as the pro- 
duction of fabricated ships ; the building of concrete, cast- 
iron and composite ships, the rapid development of the 
motor ship, improvement of the turbine, the increasing use 
of oil as fuel for steamers, etc. The bulk of the first volume 
contains, in English as well as in French, the classification 
of all the new as well as the old ships recorded in the Reg- 
ister. The second volume is a compilation of statistical 
data, invaluable both to the practical shipping man and to 
the student of shipping problems. 

History of the American Bureau of Shipping. — As far 



CLASSIFICATION AND REGISTRY 3S9 

as this country is concerned, Lloyd's supremacy has been 
shattered by the reorganization of the American Bureau 
of Shipping, also known as "the American Lloyd's." The 
history of this classification society, which was founded 
in 1862 closely reflects the history of the American mer- 
chant marine since that time. As a result of the rapid de- 
cline of the American merchant marine, the prestige and in- 
fluence of the American Bureau of Shipping also waned and 
the Bureau would undoubtedly have had to go out of busi- 
ness long ago, had not an insurance company taken over the 
property and met all deficits of the Bureau. In 1915 when 
the nation's maritime consciousness began to show signs of 
reawakening, the plan of reorganizing the Bureau was taken 
up by a committee consisting of the leading shipbuilders, 
shipowners and underwriters of the United States. As»early 
as 1900 a tentative agreement had been reached with Lloyd's 
which outlined certain principles of co-operation between the 
American and the British classification societies. It was 
natural, therefore, that the reorganization committee con- 
templated the resuscitation of the Bureau in more or less 
close conjunction with Lloyd's. When, however, in Jan- 
uary, 1916, at a meeting between Lloyd's representatives and 
the reorganization committee in which Mr. Stevenson Tay- 
lor, the present President of the American Bureau of Ship- 
ping, partook, the British representatives declared that all 
new designs for American ships would have to be submitted 
to London for approval, the reorganization committee voted 
unanimously "not to enter into any arrangements with British 
Lloyd's but to go ahead and make the Bureau what it should 
be; for it seemed to the members of the committee that any 
possible arrangement that could be made between the Brit- 
ish Lloyd's lion and the American Lloyd's lamb would re- 
sult in the proverbial arrangement between the two animals, 



360 OCEAN SHIPPING 

wherein union could be secured only by their 'lying down 
together' with the lamb inside of the lion." Thus, on March 
1, 1916, the American Bureau of Shipping started under 
new officers, with the ardent support of shipbuilders, re- 
pairers, underwriters and owners throughout the United 
States. It is entrusted with the classification of the mer- 
chant steamships building for the Emergency Fleet Cor- 
poration. Its staff of skilled surveyors had to be increased 
from about a dozen in 1916 to over 200 at the present time. 
Mr. Edward N. Hurley may be quoted as follows : 

Official recognition of the American Bureau. — "The 
development made by your Bureau is extraordinary, both 
in personnel and in the character of the work done; and it 
is beyond question that one of the greatest needs of the 
future for the proper maintenance and development of an 
American merchant marine is a strong organization operat- 
ing on the lines of your Bureau, and developed to meet the 
needs as outlined in your letter." ^ 

The support given to the American Bureau of Shipping 
by the Shipping Board, which is shared by the House Com- 
mittee on Merchant Marine and Fisheries, has found ex- 
pression in a Bill introduced in Congress by Representative 
George W. Edmonds of Pennsylvania, which proposes to 
render it obligatory for the United States Government's De- 
partments and Commissions to recognize the Bureau. This 
proposal was virtually accepted and put into effect when the 
"Merchant Marine Act, 1920" became law." 

The Bureau's growth is indicated by the following figures : 
Early in 1916, the classification and inspection of the Amer- 
ican Bureau extended to only 8 per cent of American-built 
vessels, while Lloyd's and the Bureau Veritas (French) had 

1 Nautical Gazette, November 22, 1920, p. 201. 
* See also Chapter XXX, Section 25, of the Act. 



CLASSIFICATION AND REGISTRY 361 

92 per cent ; but by July 1919, the respective figures were 68 
per cent for the Bureau and 32 per cent for the two other 
societies. 

Co-operation with other agencies — It should be men- 
tioned that, in November, 1916, an agreement was reached 
with the British Corporation for the Survey and Registry of 
Shipping, which insures harmonious action and an inter- 
change of ideas advantageous to shipowners and builders 
on both sides of the Atlantic, without interfering with the 
independence and national character of either Society. A 
similar arrangement was made with the Registre Navale 
Italiane and with a newly formed Japanese classification so- 
ciety, which developed out of the Japanese Imperial Marine 
Association. 

"New Rules of the American Bureau of Shipping, along 
with the Revised Rules of the British Corporation for Trans- 
oceanic Vessels, also the New Rules of the American Bureau 
of Shipping for Vessels Employed in the Coastwise, Lakes, 
Bays, Sounds and River Service, will be based on the re- 
sults of the most recent findings of Technical Societies, 
Governmental Committees and the International Conference 
on Safety of Life at Sea with such flexibility of application 
as will make them peculiarly adapted to American stan- 
dards. 

"The arrangement immediately removes all difficulties in 
regard to international load-lines for American classed ships. 
The Bureau will act for the Corporation in America and 
vice versa. The classifications will be in effect interchange- 
able. Dual classification will be obtainable at a little more 
than the cost of single classification and thus will develop- 



362 OCEAN SHIPPING 

ment on these lines become real international classification 
in its best form." ^ 

In 1916, the Great Lakes Register, established in 1896 for 
the registry and clasification of vessels on the Great Lakes, 
was acquired and incorporated in the American Bureau of 
Shipping as The Great Lakes Department. The steam- 
boat inspection service of the Department of Commerce has 
accepted the certificate of classification as standard, barring 
a few exceptions. The Bureau's publication is known as 
The Record of American and Foreign Shipping. 

'^American Bureau of Shipping, pp. 11-12. 

REFERENCES 

American Bureau of Shipping. Various Publications. 

Hough, B. O. Ocean Traffic and Trade. Chap. X. (1915). 

HuEBNER, S. S. Marine Insurance. (1920). 

Johnson and Hhebner. Principles of Ocean Transportation. Chap. 
XVI. (1919). 

Kirkaldy, a. W., British Shipping. Book II. Chap. VI. (1914). 

Lloyd's Register of British and Foreign Shipping. {Annual.) 

Owen, D. Ocean Trade and Shipping. Chap. III. (1914). 

United States. Commissioner of Corporations. Transportation by 
Water in the United Stales. Part 1. Chap. V. (1909). 
Senate Committee on Commerce. Hearings relative to the Estab- 
lishment of an American Merchant Marine. (1919-1920). 
Senate Committee on Commerce. Hearings pursuant to S. Res. 
170 on United States Shipping Board Emergency Fleet Cor- 
poration. Parts I and II. (1919). 



CHAPTER XIX 

THE HISTORY AND ORGANIZATION OF MARINE 
INSURANCE 

Importance of Marine Insurance. — It is impossible to 
exaggerate the importance of marine insurance. With- 
out it only the wealthiest individuals and corporations 
could afford to risk their vessels upon the high seas; 
without it only such commodities as afford a wide margin 
of profit could enter into world trade ; without it many 
lands, which to-day are the homes of millions would be 
deserted. Industries would be lacking raw materials; 
and raw materials would rot for want of transportation. 
Marine insurance is the basis of credit, without which 
commercial loans to importers and exporters would be 
impossible. It is "an instrurnentality of commerce almost 
as much as the vessel." It is "the bodyguard of com- 
merce." The "commercial set" that is the set of the most 
vital shipping papers, consists of the invoice, the mer- 
chant's bill; the bill of lading, the carrier's receipt; the 
draft, or bill of exchange, the merchant's payment; 
and the marine insurance policy. Of these the last 
named is the "document of guarantee" which gives life 
to the bill of lading, and the draft. Insurance must 
take its place beside banking and shipping before the 
instrumentality by which foreign trade is carried on 
may be called complete. 

"Marine insurance bears to commerce the relation of 
bodyguard rather than mere servile attendant. * * * 
Of the active forces which influence, control, or forbid 

363 



364 OCEAN SHIPPING 

the employment of shipping none has greater effect than 
the marine insurance power." ^ 

In his testimony before the sub-committee on Marine 
Insurance of the House Committee on Merchant Marine 
and Fisheries, Mr. Edward N. Hurley, former chairman 
of the United States Shipping Board, said: 

"I am satisfied from the experience I have had in con- 
nection with the operation of ships, that legiislation 
passed in connection with marine insurance will be the 
most important part of the legislation the committee as a 
whole will have to pass on." 

Economic services rendered by Marine insurance- — 

Professor S. S. Huebner, of the University of Pennsyl- 
vania, Expert in Insurance to the United States Shipping 
and the Committee on the Merchant Marine and Fish- 
eries, in his valuable reports on the "Status of Marine 
Insurance in the United States," ^ and on "Legislative 
obstructions to the development of marine insurance in 
the United States," enumerates the following economic 
services rendered by Marine Insur&nce: 

(a) Marine Insurance eliminates the paralyzing effect 

of worry and fear. 

(b) Distributes losses to ultimate consumer. 

(c) Causes the cheapest distribution of loss. 

(d) Serves as a basis of credit. 

(e) Standardizes types of risks and creates justice 

between property owners. 

Early beginnings of marine insurance. — Marine insur- 
ance is essential to shipping. In primitive form, it has 

1 William W. Bates, American Marine, p. 182. 
^Washington, 1920, Government Printing Office. 



HISTORY OF MARINE INSURANCE 365 

been in existence so long as to cause its origin to be lost 
in the mists of history. About 2,000 years ago, the 
people of Rhodes, that famous shipping centre of the 
ancient world, located at the eastern end of the Mediter- 
ranean, regulated by law that portion of our modern 
marine insurance business which is known as "general 
average." This ancient law has been called "the ark 
of the covenant of the law maritime." The old Rhodian 
law provided that "if goods are thrown overboard to 
lighten a ship, that which has been given for all shall 
be replaced by the contribution of all."^ This shows 
the root idea of marine insurance, which is to distribute 
amongst a number of individuals a loss which otherwise 
would be crippling to anyone of them. In this respect 
marine insurance is no different from other important 
branches of the insurance business. As conducted at 
present, marine insurance developed in Italy, in those 

* An interesting contribution to the early history of general average 
was made by Mr. G. H. Henderson in an address to the Insurance 
Institute of London. We quote the following : "Commerce continued 
to flourish in the Mediterranean after the fall of Phoenicia, Rhodes, 
and Carthage, and although the Romans were never a race of seamen 
in the same sense as other great sea-bordered peoples, they com- 
manded the sea and understood its power, and in their legal fashion 
they codified its customs in the Justinian Digest, the earliest complete 
enactments dealing with general average, which have been preserved. 
Although these early Roman mariners hugged the shore too fondly, 
their ships grew in size, as we may see from the size of the vessel 
which carried a cargo of wheat and 276 people described in the Acts 
of the Apostles. In the description of the voyage it is recorded that 
'they began to throw the freight overboard (the cargo), and the third 
day they cast out with their own hands the tacklings of the ship.' 
So far as I know this is the only example in the Scriptures of a 
general average act. I have come across no allusions to this classic 
example among the numerous writers on general average, and though 
I may be mistaken, it appears to me it has been overlooked by them. 
Of course, in this case ship and cargo were lost, and the general 
average contribution was not collectable."^— (See The Nautical 
Gazette, June 19, 1920, p. 947.) 



366 OCEAN SHIPPING 

days when the city states of Lombardy and Venetia 
ruled the seas. The Italian origin is clearly traceable 
in the etymology of the most important terms used in 
marine insurance business. "The word policy itself is 
derived from the Italian polizza, and in like manner the 
word average in marine insurance has been introduced 
into the English language from the Italian, perhaps 
through the French. The original Italian word is avaria, 
meaning loss by damage ; the French word is avarie, and has 
the same meaning; and it is this same meaning that must 
be attached to the word average when used in the busi- 
ness of marine insurance. Average, as applied to par- 
ticular and individual losses at sea, with the word par- 
ticular prefixed to it, merely confuses one unless its 
technical significance is known. The phrase, particular 
average, contains a contradiction in itself to the or- 
dinary reader, but when it is explained" that average 
here means simply loss by damage, the phrases so fre- 
quently used in marine insurance transactions are seen 
to have a special meaning. In actual practice they give 
rise to special rights and responsibilities where a ship 
and cargo have suffered damage."* 

The Rolls of Oleron. — Later on, when as a result 
of Vasco da Gama's discoveries, the centre of gravity 
of the shipping trade shifted to the European countries bor- 
dering the Atlantic Ocean, the Rolls of Oleron, an island in 
the Gulf of Biscay, served as the model after which the in- 
surance laws and rules of England were developed. The 
insurance policy itself developed out of the "loan on 
bottomry" and was still governed by the bottomry loan 
contract long after the loan had ceased to be made and 
the interest payment had become a premium. This is 

1 Kirkaldy's British Shipping, p. 240. See also Appendices A and B. 



HISTORY OF MARINE INSURANCE 367 

one of the many examples where a legal form is retained 
long after changing conditions have altered the substance 
covered by the law. 

Marine insurance compared with transportation in- 
surance. — Insurance plays a much more important part 
in ocean transportation than in land transportation. 
This is partly due to the fact that marine transportation 
involves greater and more numerous risks, and partly 
because by law, the liability of the railroads is fixed in 
such a way as to render it unnecessary for the shipper 
to insure his goods. This discrepancy in the law gov- 
erning the respective liabilities of land and water car- 
riers is based on the difference in the conditions pre- 
vailing in the two branches of transportation. The 
railroad as a corporation, owes its existence to the state 
which grants its franchise. The steamship business is 
exposed to international competition, and restrictions 
placed upon a country's water carriers must needs 
take this fact into consideration. This is illustrated by 
the law of 1852, which was passed by Congress in 
order to place our own shipping upon a basis at least 
as favorable as that of the British. By that law, the 
carrier by sea was exempted from the old common law 
liability of common carriers and his liability was limited 
to the value of the ship after the accident.^ Again, 
marine transportation has a history which antedates 
that of the railroad by thousands of years, and which 
has left its imprints clearly discernible upon the laws 
and statutes which govern the steamship business of to- 
day. This explains the difficulties which the Interstate 
Commerce Commission meets in trying to prescribe the 
substance of a uniform bill of lading to be put in force 
* Proceedings of the Academy of Political Science, 1915-1916, p. 129. 



368 OCEAN SHIPPING 

under the provisions of the Transportation act of 1920, 
and apphcable both to railway and ocean carriers. Leading 
steamship companies * argue that the Interstate Com- 
merce Commission "has no power to require the ocean car- 
rier to participate in any particular bill of lading, but its 
power is limited to making rules and regulations to pre- 
scribe the form of a through bill of lading to be issued by 
the railway carrier in which the ocean carrier may choose 
to join." The modern tendency is toward covering land and 
water transportation risks by one policy. 

"The modern 'warehouse to warehouse' clause enables 
goods to be protected from the time they leave the ship- 
per's warehouse in the interior of this country, through 
all the various stages of the journey either by water 
or land carriers, until they are safely delivered into 
the warehouse of the foreign consignee. In fact, it is 
asserted that modern marine insurance should justly be 
called 'transportation insurance.' "^ 

Carrier's liability under the Harter Act. — The law 

which at present governs the liability of carriers by 
water, in the case of freight shipments from American 
ports, is the Harter Act of February 13, 1893. (See 
Appendix D.) 

This Act holds the carriers liable only under the fol- 
lowing conditions: 

"(1) 'Negligence, fault or failure in proper loading, 
stowage, custody, care or proper delivery'; (2) failure 
to exercise due diligence, properly equip, man, pro- 

1 See The Journal of Commerce of February 11, 1921. 
' Report by S. S. Huebner, op. cit., p. S. 



HISTORY OF MARINE INSURANCE 369 

vision and outfit' their vessels; (3) failure to exercise 
reasonable care in making a vessel seaworthy and cap- 
able of performing her intended voyage.' '" 

In the language of the act itself, the limitations are as 
follows : 

"If the owner of any vessel transporting merchandise^ 
or property to or from any port in the United States 
of America shall exercise due diligence to make the said 
vessel in all respects seaworthy and properly manned, 
equipped, and supplied, neither the vessel, her owner,' 
or owners, agent, or charterers shall become or be held , 
responsible for damage or loss resulting from faults or 
errors in navigation or in the management of said ves- 
sel ; nor shall the vessel, her owner, or owners, charter- 
er's agent, or master be held liable for losses arising 
from damages of the sea or other navigable waters, acts 
of God or public enemies, or the inherent defect, quality 
or vice of the thing carried, or from insufficiency of 
package, or seizure under legal process, or from loss re- 
sulting from any act or omission of the shipper or 
owner of the goods, his agent or representative, or from 
saving or attempting to save life or property at sea, 
or from any deviation in rendering such service."^ 

Contractual provisions of the bill of lading. — Be- 
sides, the liability of the carrier is limited by contractual 
provisions contained in the bill of lading. The following , 
are the liability clauses contained in a typical bill of 
lading. 

* Johnson and Huebner, ol>. cit., p. 237. 

" For an interesting discussion of the legal aspects of the Harter 
act, see Annin, Ocean Shipping, Chapter XL. 



370 OCEAN SHIPPING 






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HISTORY OF MARINE INSURANCE 



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HISTORY OF MARINE INSURANCE 7,11 

Merchants particularly object to one clause found in th'^ 
bills of lading of some steamship companies : 

"Neither the carrier, the vessels nor the agents sha 
be liable for any claim for ioss of or damage to goods in an, 
event unless notice in writing of the claim shall have been 
presented to the ship's agents at the port of discharge 
before the removal of the goods from the wharf along 
side which the ship is discharged." 

The clause is said to be both unreasonable aftd un- 
workable, and in the long run will do more harm than good, 
even to the carrier. 

Organization of marine insurance business. — At the 
present time, marine insurance is carried on, primarily, 
by underwriting associations and marine insurance com- 
panies. In addition to this, certain kinds of marine risks 
are insured by government bureaus, and a few very large 
shipping concerns are undertaking their own insuring. ' 

By far the most important underwriter's association 
is Lloyd's which, since 1774, has been doing business in 
the Royal Exchange in London, and which was incor- 
porated in 187L In the previous chapter we have given 
the history of Lloyd's Registry of British and Foreign 
Shipping, which is a separate organization from the cor- 
poration of Lloyd's though the controlling interests are 
largely identical and the work of Lloyd's Register serves 
as the basis of that of the underwriters' association, 
especially as far as hull insurance is concerned. We 
now refer to the underwriting business only. 

Lloyd's business methods. — Although incorporated, 
Lloyd's does no marine insurance as a corporation. It 
is an insurance exchange where each of the approx- 



378 OCEAN SHIPPING 

imately four hundred members has a desk alloted to him 
at which he, individually and independently, pursues his 
business as an underwriter, subject to the rules of the 
exchange. The technique of this business is described 
as follows: 

"An English merchant on shipping goods, sends to 
the Royal Exchange a memorandum giving particulars 
of the shipment, — kind of goods, number of packages, 
values, destination, rate of premium desired, etc. This 
is put into the hands of a broker who dispatches one of 
his clerks on a tour around the desks of the other mem- 
bers. Those who wish to 'take a line' on that particular 
risk initial the 'slip,' as it is called, that is, underwrite it, 
with the proportion of the total each wishes to assume 
— perhaps "£50, perhaps ilOO or i200, seldom more, ex- 
cept in risks involving very large amounts, of money. 
Five or six underwriters usually cover a risk of $2,000, 
twenty-one of $10,000. The broker then sends a 'cov- 
ering note' to the shipper, serving until a regular policy 
can be made out in due form endorsed with the signatures 
of the various underwriters who have agreed to share 
in the risk." * 

To give a concrete example of a policy indorsed by un- 
derwriters we quote Captain Robert Dollar: 

"The ship was insured for $180,000. I had a Lloyd's 
policy for it, and on the back of it there were 103 differ- 
ent signatures for various amounts. Some for a hundred 
pounds, some fifty pounds, some five hundred pounds, 
and so on. Lloyd's had taken their insurance and then 
re-insured it and marked it all on the back; so each 
paid the amount that was on it in his name." ^ 

* B. Olney Hough, Ocean Traffic and Trade, pp. 291-292. 
" Sixth National Foreign Trade Convention, p. 499. 



HISTORY OF MARINE INSURANCE 379 

Lloyd's information service. — The business of under- 
writing is unthinkable without a complete system of col- 
lecting and disseminating marine intelligence. There- 
fore, Lloyd's agents are to be found in every port and 
the information collected by them and communicated to 
the London headquarters as promptly as modern facili- 
ties permit, is published in the official daily publication 
known as Lloyds List, the early history of which was given 
in a previous chapter. Besides this, Lloyd's publishes the 
Index which, in a handy form, gives detailed information 
concerning particular vessels; the Register of Captains, 
which is a biographical dictionary of certified masters of 
British ships ; and the Record of Losses, also known as the 
"black book." 

America favors company plan. — In the United States, 
little or no marine insurance business is done in this 
fashion. In this country the company plan of marine 
insurance is particularly important. This does not mean 
that other countries are without important marine in- 
surance companies ; indeed, the Royal Exchange and the 
London Insurance Corporation are the oldest in the 
world, having entered into competition with Lloyd's as 
early as 1720. Under the company plan of marine in- 
surance, one company takes the whole of any profifered 
risk and frequently re-insures portions of the risk in other 
companies. While this form of marine insurance dates 
back to the eighteenth century it gained its present sig- 
nificance only during the nineteenth century, when many 
large companies were founded in important shipping 
centres, particularly London, Glasgow, Liverpool, Phila- 
delphia and New York. Until recently, the bulk of the 
American marine insurance was placed with foreign con- 



380 OCEAN SHIPPING 

cerns and less than a dozen corporations were known to 
carry on a large marine insurance business. 

Extent of foreign control over American marine in- 
surance. — Mr. John Barton Payne, now Secretary of the 
Interior, and at one time Chairman of the Shipping 
Board, summed up the marine insurance situation in the 
United States as follows: 

"Of the total marine insurance originating in the 
United States, at least two-thirds is controlled by non- 
admitted foreign companies or by the branch offices of 
admitted foreign companies, and only one-third by Amer- 
ican companies. At least 20 per cent of all marine in- 
surance originating within the United States is exported 
directly abroad to be placed with non-admitted under- 
writers or with the home offices of admitted foreign com- 
panies. In the case of American hull insurance at least 
SO per cent is thus exported, and much the same situation 
also exists in the case of builders' risk insurance. 

Moreover, owing to the absence of a domestic market 
sufficiently large to assure a proper spread of risks 
through re-insurance, many American companies are com- 
pelled to place a very substantial part of their re-insurance 
with foreign underwriters, and to a very large extent 
with underwriters not admitted to transact business 
within the United States. But this re-insurance, it should 
be noted, goes abroad with very little being given to 
American companies in exchange. With reference to 
hull insurance, particularly, the overwhelming majority 
of American companies report that they do not emphasize 
this branch of the business because of its unprofitable- 
ness, and because the competition of companies located 
in foreign countries and the facility with which owners 



HISTORY OF MARINE INSURANCE 381 

and brokers export marine insurance to such countries 
preclude any hope of success." 

How is this large extent of foreign control to be ex- 
plained? It is claimed^ that the source of foreign 
strength is to be found largely in. wise accumulation of 
huge surpluses earned in gradually developing a world- 
wide market; in a broader spread of risk and broader re- 
insurance facilities; in a close union with banking and 
shipping interests ; in freedom to combine and form com- 
munities of interest ; in the permission to write numerous 
kinds of insurance and in a smaller tax burden, a smaller 
overhead charge (owing to foreign standard of office 
salaries, etc.), and finally in the support of their home 
merchants and vessel owners. 

Re-awakening of American marine insurance. — ^Just as 
the American marine insurance business has suffered a 
sharp decline since the Civil War, because of the decay 
of our merchant marine, so, a recent revival of our mari- 
time interest has given a new impetus to the develop- 
ment of our marine insurance business. Efforts are being 
made to modify existing laws, and to create new laws in 
such a way as to encourage Arnerican insurance com- 
panies to enter into competition with foreign under- 
writers and insurance companies. It is keenly felt that 
from a national standpoint it is unwise to submit infor- 
mation regarding every conceivable detail of our foreign 
trade to foreign insurers. The low rate of sterling ex- 
change has been an important factor in diverting Ameri- 
can marine insurance to American companies, because 
the insurer has to insure for a larger sum to take care 
of the loss sufifered in converting pound sterling into 
1 S. S. Huebner's Report, cited above, p. 27. 



382 OCEAN SHIPPING 

dollars, or else pocket the loss. In many cases this situ- 
ation has resulted in putting the American insurance 
business on a "dollar account basis," both policies and 
premiums being figured in dollars instead of pounds 
sterling. Largely basing its conclusions upon the testi- 
mony of Professor S. S. Huebner, ^ in which he gave a 
vivid account of the lamentable condition of marine in- 
surance in the United States, the sub-committee of the 
House Committee on Merchant Marine and Fisheries, 
in its report makes the following recommendations : 

Recommendations of House Committee on Merchant 
Marine and Fisheries. — "Your Committee has given much 
thought to available ways and means of bettering con- 
ditions. It has reached the conclusion that the subject 
must be approached from at least three directions, and 
collective assistance along all these lines is necessary. 
The remedy lies partly in (1) self-help on the part of 
American companies through co-operative action, es- 
pecially in the formation of a comprehensive insurance 
bureau for re-insurance purposes ; (2) federal assistance, 
and (3) state help through the removal of unnecessary 
and paralyzing legislative restrictions. 

"Your committee believes that the Federal Government 
may be of further assistance in several respects, and de- 
sires to recommend the following: 

"1. That marine underwriters should be assured of 
the legality of combinations and associates designed to 
facilitate re-insurance or to extend underwriting activities 
to foreign countries. A surprisingly large number of 
underwriters expressed themselves to the committee as 
fearful of the legal consequences that might attach to 

* See, also his report on Status of Marine Insurance in the U. S. 



HISTORY OF MARINE INSURANCE 383 

the creation of such associations or combinations. To 
this end, it will be advisable, and even if unnecessary- 
can do no harm, to free all such co-operative efiforts from 
the possible operation of the Sherman and Clayton anti- 
trust acts. 

"2. That the Federal one per cent, tax on marine in- 
surance premiums be repealed. There should be no taxes 
on such insurance except on net profits. 

"3. That legislation be enacted for the incorporation 
on a liberal basis of re-insurance companies in the Dis- 
trict of Columbia. 

"4. That a liberal marine insurance law be enacted 
for the District of Columbia. This recommendation was 
heartily supported before the committee by the Associa- 
tion of Marine Underwriters of the United States, chiefly 
on the ground that it would serve as a model for duplica- 
tion in the various States. 

"5. Your committee has also had its attention called 
by many underwriting interests to the peculiar status of 
marine adjusters in this country as contrasted with their 
quasi-judicial position in other countries. Abundant evi- 
dence was offered to show that the existing system is 
productive of serious irregularities. The committee feels 
that the question of whether adjusters should have any 
business connection with either brokers or underwriters 
is worthy of further investigation." 

American insurance pools. — Some of these recommen- 
dations have since been put into effect. We mentioned 
in the previous chapter how the Merchant Marine Act, 
1920, is designed to aid the American Bureau of Shipping. 
But it also comes to the assistance of the underwriters. 
The details of the Act will be discussed in Chapter XXX. 



384 OCEAN SHIPPING 

jBiit we mention here the fact that by the new law, 
marine underwriters are exempted from the restrictions, 
of the Sherman Anti-trust Law. Taking advantage of 
this privilege, fifty American insurance companies have 
signed an agreement under which three syndicates are 
to be formed, described respectively as "A, B, and C." 

"Syndicate A" will supply at cost a surveying, inspec- 
tion and loss service for Shipping Board and privately 
owned vessels. "Syndicate B" will take care of the 
mortgage interest of vessels sold by the Shipping Board 
and partially paid for, the underwriting capacity on a 
single hull being $2,000,000. "Syndicate C" will write 
approved steel ocean going hulls, privately owned, with 
a $2,500,000 underwriting capacity upon a single hull. 
The first two of these syndicates is to be entirely Ameri- 
can; the third takes in foreign admitted companies to a 
limit of approximately one-third of the syndicate's 
capacity.' 

Commenting upon these developments. Admiral Ben- 
son said: "Recent Congressional investigation of marine 
insurance demonstrated conclusively that our leading 
foreign competitors use marine insurance as a power- 
ful national commercial weapon, while there has been 
a woeful absence of efficient facilities of our own. 
Fully two-thirds of all marine insurance originating in 
the United States was found to be under foreign control. 
These undesirable shortcomings, it is believed, will be 
remedied by the newly created syndicates. By acting 
through a single organization, American companies are 
placed in a position to provide adequate reinsurance 
facilities, to obtain a proper spread of business, to greatly 
reduce their overhead charges, and to meet promptly and 

* See Nautical Gazette, July 10, 1920. 



HISTORY OF MARINE INSURANCE 385 

effectively any foreign competitive situation that inay 
.arise." 

Reaction of Americanization process on British inter- 
ests. — This process of "Americanization" is said to be 
annoying British insurance interests. On tlie one hand 
they resent the aggressive features of the Jones Law and 
on the other they are hard hit by a recent amendment 
to the New York insurance law requiring admitted 
foreign companies to report all American insurance busi- 
ness and to keep heavy reserves in this country. In fact, 
it was reported that some British concerns refused to 
underwrite American marine risks at their home office.^ 
Commenting on the reported decision of prominent Lon- 
don underwriters to refuse to accept American risks 
until certain provisions of the new American merchant 
marine Act have been modified, Senator Jones declared 
this was "just what we need to awaken our people to 
the menace of alien domination in important lines of 
business. This talk of embarassing American business 
interests by withdrawing British marine insurance" he 
continued, "will accomplish speedily just what we have 
hoped to accomplish even though slowly and by great 
effort under the Merchant Marine Act, 1920." ^ 

Self-insurance. — Of recent years there has been a 
growing tendency for steamship companies to insure 
their ships themselves. In some cases this self-insurance 
even covers passengers, baggage and cargo, but hull in- 
surance is more commonly practiced in this way. Two 
methods of self-insurance may be distinguished. The 
one practiced by such "portmanteau" companies as the 
Hamburg-American Line was before the war and the 

^ Nautical Gazette, July 3, p. 24. 
= New York Times, June 26, 1920. 



386 OCEAN SHIPPING 

Peninsular and Oriental is to-day, is self-insurance in 
the proper sense of the word. The other method is more 
properly termed mutual insurance and is practiced by 
large steamship owners' associations or clubs. As an 
example of the first type, the case of the Hamburg-Amer- 
ican Line may be cited, which is supposed to have con- 
structed the Imperator, Vaterland (now the Leviathan) 
and the Bismarck out of the money which otherwise 
would have gone to insurance companies in the form of 
premiums. The plan is based upon the fundamental idea 
that what a steamship company wants in the case of 
the loss of one ship, is another ship, and that it is 
better to have this ship provided beforehand than to 
start building the new ship after the old one is lost. The 
most prominent example of the mutual insurance asso- 
ciation is that organized in Liverpool in 1913, with Sir 
Norman Hill as Manager and Secretary: 

"The object of this new undertaking is to cover war 
risks. As these lines are being written, the membership 
includes the management of about 433 vessels with a 
value of somewhere about £29,000,000; and there is a 
probability that all the great passenger lines will 
eventually join." 

"The present scheme is to insure war risks only when 
Great Britain is neutral, and so cover the risks of mem- 
bers until their ships arrive in a safe port after a war has 
been declared. In the event of a ship entering a neutral 
port she will be covered for a period of ten days after 
arrival, or should the port cease to be neutral during that 
time, she would be covered until arriving at some really 
safe port. The scheme does not contemplate covering 
any risks that would arise after this country is at war 



HISTORY OF MARINE INSURANCE 387 

with another nation; this is too comprehensive a subject 
and only the nation under circumstances, as they arise, 
can possibly undertake to deal with it." ' 

An intertsting case which represents a cross between 
self-insurance and government insurance is that of the 
United States Shipping Board, which, by setting aside 
a revolving sum of 25 million dollars, attended to the 
insurance of the ships under its control. Government in- 
surance is usually confined to war risk insurance only 
and is undertaken only because private capital seems 
inadequate to take care of this particular risk, princi- 
pally for the reason that sufficient data are lacking which 
permit an exact calculation beforehand of the probable 
loss. 

Re-insurance ; definition and general purpose. — A word 
should be said about re-insurance. "Re-insurance may be 
defined as the practice whereby one underwriter (the 
original insurer) transfers his liability under a policy, 
either in part or in whole, to some other underwriter (or 
a group of underwriters) known as the re-insurer. 

The fundamental purpose of re-insurance is to give un- 
derwriters the benefit of the greater certainty that results 
from a proper application of the law of average. By 
spreading their liability over a large number of risks, and 
retaining only a moderate amount in each instance, they 
succeed in stabilizing their business. Each company 
is enabled to accept policies for large amounts and yet 
can protect itself against staggering losses by adjusting 
its risks in such a manner as to preclude the possibility 
of any serious inroad into its capital and surplus." ^ 

iKirkaldy, British Shipping, pp. 255-256. 

2 S. S. Huebner, Report on Status of Marine Insurance in the 
United States, p. 35. 



388 OCEAN SHIPPING 

The importance of re-insurance can hardly be exagger- 
ated. Without this chance of reducing the risk of their 
business activities many of the smaller insurance com- 
panies would soon disappear from the field. It happens 
that one insurance company has in force, at one time, 
over one hundred re-insurance contracts with other com- 
panies. A large risk is thus distributed sometimes among 
scores of companies. Sornetimes underwriters agree to 
give their re-insurer a definite proportion of their busi- 
ness. This is called "share or participating re-insurance." 

Re-insurance is often handled by so-called re-insurance 
pools. These are arrangements whereby a number of 
companies agree to share all insurance business on a 
given commodity or on all business within a given terri- 
tory on the basis of certain agreed propositions. Such 
pools are for instance ■} the cotton re-insurance agree- 
ment, burlap agreement, joint grain certificate, etc. 

1 Ibidem, p. 39/. 

REFERENCES 

Hough, B. O. Ocean Traffic and Trade. Chap. X. (1915). 

HuEBNER, S. S. The Status of Marine Insurance in the United 
States. Report submitted to the United States Shipping Board. 
(1920). Report on Legislative Obstructions to the Develop- 
ment of Marine Insurance in the United States (approved by 
the Committee on the Merchant Marine and Fisheries, December 
11, 1920). 

Hurley, E. N. The New Merchant Marine. Chap. XVII (1920). 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XVI. (1919). 

KiRKALDY, A. W. British Shipping. Book II. Chap. VI. (1914). 

Owen, D. Ocean Trade and Shipping. Chap. III. (1914). 

United States. Hearings on Marine Insurance before the Subcom- 
mittee on the Merchant Marine and Fisheries. House of 
Representatives. July, 1919. 



CHAPTER XX 

ELEMENTS OF MARINE INSURANCE PRACTICE 

Insurable interests and some important risks. — The 
two most important branches of marine insurance are hull 
insurance and cargo insurance. Besides these, however, 
freight charges may be insured, also profits from the trans- 
portation of the goods as well as any other interest con- 
nected with the successful termination of an ocean voyage, 
as long as this interest can be measured by a monetary 
standard. 

These various interests may be insured against a con- 
siderable number of risks and perils, particularly those 
losses occasioned by the so-called "perils of the sea." This 
term refers only to fortuitous casualties of the sea and covers 
only such losses as are caused by storms, fog, lightning, ice- 
bergs, derelicts, or other marine obstruction, stranding, 
foundering, collision with another vessel or with marine 
structures, or any other unavoidable damage to property 
resulting from the elements. In case of collision, two kinds 
of risks must be distinguished, namely, those to which the 
property of the insured is exposed and those which arise 
out of the liability for damage sustained by other vessels, if 
the shipowner or his agent is at fault in causing this damage. 
It should be understood that chafing or ordinary wear and 
tear of cargo — ^practically certain on a sea-voyage — are not 
included in "perils of the sea" ; only an unusual occurrence 
is provided against, such as shifting of cargo, caused by 
stress of weather, damage by sea-water, and such other cas- 
ualties as may be covered by agreement in each individual 

389 



390 OCEAN SHIPPING 

case. Nor is the property insured against risks arising from 
its own inherent defects. 

Special risks. — Special insurance must be provided for 
fire risk, jettison, i. e., the throwing overboard of part of 
the cargo, or casting away the masts, spars, rigging or fit- 
tings of vessels for the purpose of lightening or relieving 
the ship in case of storm or accident for the common good ; 
barratry, which includes all forms of fraud and knavery on 
the part of the master of the vessel or the crew, such as wil- 
ful scuttling or abandonment of the vessel. Also the loss 
from theft or pilferage must be arranged for especially. 

All risks of war are excluded from the ordinary marine 
policy. They are covered by a separate contract or by en- 
dorsement on the policy. The term "war risk" covers losses 
of ship or cargo caused by an enemy, pirate or man-of-war. 

A sample copy of a certificate of insurance against war 
risk is found on page 391. 

Meaning of "all other perils."— ^The term "all other 
perils," as legally interpreted, includes only risks or perils 
similar to those distinctly stated in the policy contract. By 
arrangement, all kinds of clauses may be written into a 
marine insurance policy, covering such risks as are attached 
to mule-back transportation in the Andes, leakage of liquids, 
breakage of machinery, etc. Indeed, we might say that the 
marine insurance policy may be made to cover practically 
every conceivable transportation risk to which any over- 
sea shipment is subjected from the time that it leaves the 
manufacturer's plant — possibly far inland — until it reaches 
the consignee, who may also be located hundreds of miles 
from the port of debarkation.* 

* The term marine insurance is applied to many inland shipments 
which do not touch a boat at all ; cf. cotton transportation within the 
United States. 



MARINE INSURANCE PRACTICE 



391 



CERTIFICATE OF INSURANCE 

AGAINST 

WAR RISK ONLY 



Insurance Company 




PHILADELPHIA 

nfOOBFOKASKD A. D. 17iW 



of North America 



tPLACE AMD PATS _ 



Wflw YftT-V, ApTJl 7, 1917 



XEbfS fS to Certifier That on the =71;^ day of„jLEni 19-13- 

t H ii s Company, in consideration of the premium agreed to be paid insured, 

WftTiTUBft Pnint fc V aT-ninVi Mfg. Co. , fof 

— - Three Hundred and Twenty-fi ve , . Dollars 



WarKisk ' ^ ^- e afte« Q-f palnta 
1 "'.S*' 1 Brit 1 ah 



JS/S^ 



_, valued at sum hereby insured, per 
Verdi 



Warranted sailii:g on or before &p-p4l is^ 1Q17 . 

fiwn New York 



-to Montevideo 



Thia inflnranoe eoroB only the riak it capttm, b^iuts or dcstnictioD or danuge bjr men-ot-wu', bj lettei of mut, by UUnga »t •••, 
uicata, KfltruntB, dctftinmentfl uid Acta of Idnga, prince* and people nuthoriied hy uai Innftpeecation of hoatOities betweeo belllgennt 




to ftbandon in cam of capturt, Miiure or 
kUon if givea to tbli Compu/. 
sqaenoe of bloclud*, or of utj 
id then end the Toynge, 

on land. 
It consignee or destination; 
iwnership, Interest, consignee, or 

It is warranted that the bills of lading shall show 



aftUonj; but frritid'ng cIbuob for delay, dsterioratioD and/or loaa of muket agd wai' 
detentioD, until after condemnation of the property innucd, nor uotOjixt ~ 
Alao vunnlcd not to abudon in cue of blockade, and b» 
attempt to erado blockade, bnt, b event of blockadSlto M 

Warranted covering wMte Y^E^boVik ht 

Warranted no QermiinVuVM^ bA T 
and warranted free of ccmvrpnatlp^ V^ t 
destination. _ 

On shipments to neutr^l-dSui^riA^)i< 
the name and address of the^^inaPconslgnee. 

In case of ftny Iom or miafDrtone, it maQ be lawful and nrrwary to uid lor fiie BMored, bla or tbdr faeton, serranta and a^gna, 
to me, labor and travd for, in and aboat the defence, eafegnsrd and reooTeiT of the uid (ooda and merdiNidlate, or any part thereof, 
withoot prvjudicfl to thli inrarancc; nor eball the acta of the oaeured or inmrera. In recovering, aaving and prcaerving the property Inaund, 
in eaaa of diaaater, be eonadered a waiver or an acceptance of abandonment; to the ehargea whervof, the nid tniurann Company wUl 
aoBtilbiito aocording to the nto and quantity pf the som herein {named. 

Xa eaaa of loo, mieh loaa to be paid la thirty days after fuQ pioofa of Iom, pioofB of Intercal, and adjuatment exhibited to the [dbuimi. 

It b horaby nndoilood and apved that, in eaae of loaa, aueh loaa ia payable to the order of ^**APV^f^O (inmt\y. fe C. in. 

MontaTfirien , . ■ on nrrendar of thia policy, whieh eonveyi all righta 

of tha ortpnal aMored aa bacin piofided (for the pnrpoae of eoHeeting any loa) and (aa rcapeeta third parties) b free from any 
Uafaffity (or vqi^ psnhima. 

•In ease of datm imdv thia policy Immediato notice ia to be amt to thia Company at Philadelphia or to McBsra. T1^. E. Webatci ft Co. 
■I Tif n d""! &i^and. 

IJadtf e«tifieat« iMoad In X)oIlBn and pttyaUa abroad, dalaia to ba settled altt^juml rat* otEidiaiio. 



Not Talld unless Counterslsned 
^ Piatt & Famum 




it Uovd*. but nblwl to tha eondmou ol 



GUm« an to bs Mlliiitwl aoooidiDsto L.~ — -- — — ■^—.-—^—.— i 

M_- w v.WEBSTER*C0..3uiaaSI»atSqiutre,I«iid(ia.EiicUa<I,an 
NdUi. Tot«iJcrm,vilhlli»RnmiimLi>'atefaT»aiBtHair "— - 



ID. ■■"r'"*" an too fiAVjrm. 
ardv to tduet a claim imdi 



tbs Attomayi ol lb« Company, o 



MASKS AXm SnTMBBRB 




moNTcyipeo 



1-22 



nviD«ut of Inlsraal Rsrniia Stanp TtafOaraBtMd by the InnMnea Company oINoftb A 
tmdv Trouai7 D«iaua No> 3104. 
"ALSO WARRANTED FREE OF CLAIM FOR LOSS, DAMAGE OR EXPENSE 
N C0N8E0UEKCE OF ANY PROHIBITION, RESTRICTION OB EMBARGO. OP 
)R BV THE GOVERNMENT bF THE UNITED STATES OF AMERICA OR OF 
iNy VIOLATION OR ATTEMPTED VIOLATION THEREOF." 

WARRANTED FREE FROM ANY EXPENSE, LOSS 
AND/OR DAMAGE ARISING FROM CAPTURE, SEIZURE, 
ARREST,Re8TRAINT,PB£EMPTION OR DETAINMENTS 
BY THE UNITED STATES GOVERNMENT OR THE 
GOVERNMENT OF ANY STATE THEREOF, 



B/L No. 4182 



nf Manufacturers. 



35(2 OCEAN SHIPPING 

Different losses. — Marine insurance may offer protec- 
tion against various kinds of losses. In the first place, a 
policy may be taken out to cover the "total loss" of the ves- 
. sel, its freight, cargo, profits or other insurable interests. 
A distinction is made between "actual total loss" and "con- 
structive total loss." The first covers a total destruction, or 
damage to such an extent that the property is absolutely 
no longer of practical value to the insurer. Constructive 
total loss, on the other hand, is sustained in cases where 
property, although but slightly damaged, is, nevertheless, 
owing to surrounding circumstances, placed in such' a way 
that it is of no further value to the insurer. The usual 
example cited for this case is that of a vessel which, although 
but slightly damaged, must be abandoned. In this case, the 
insured gives notice of abandonment and obtains the full 
amount of the insurance on a "constructive total loss." 

"Partial loss" is a loss of a portion of the thing insured. 
"Partial loss" may be settled in accordance with either 
"particular average" or "general average" rules. A "general 
average" loss is one "arising out of sacrifices made or ex- 
traordinary expenses incurred for the preservation of the 
ship, cargo and freight money, for the benefit of all interests, 
This is assessed ratably against all property involved. It 
is a voluntary and intentional extraordinary sacrifice 
to protect all the common good. A sacrifice to protect the 
ship alone, or the cargo alone, is not covered by general , 
average. It is the opposite of an accidental loss caused by 
a maritime peril. A loss caused by water to extinguish a fire 
is general average, but not to the packages which themselves 
were on fire." * 

Average adjustment. — "Subsequent to the establish- 
ment of the act of voluntary sacrifice it is the duty of the 

* The Americas, August, 1919, pp. 29-39. 



MARINE INSURANCE PRACTICE 393 

owners of the vessel to appoint average adjusters/ who draw 
up what is called a general average statement. This lists 
the disbursements made and the sacrifices incurred and 
distributes over the different interests involved (i. e., freight, 
cargo, and ship) the contribution due from each interest." ^ 

It is customary to insure a shipment for the total amount 
of the invoice plus 10 to 20 per cent, to protect the party 
insured against loss of forwarding and sundry charges. 

Shipper and consignee are equally concerned in the proper 
insurance of a shipment of cargo, but because the con- 
signee, directly or indirectly, has to pay for the insurance, 
it is he who usually issues the instructions as to the nature 
of the insurance which is to be taken out, even if the terms 
of the invoice are made to read c. i. f. 

Factors affecting insurance rates. — Insurance rates 
vary according to the kind of risk and the number of risks 
against which an insurable interest is to be insured; they 
vary, in the case of cargo insurance, according to the com- 
modity, the manner in which it is shipped, its destination, 
the official rating of the vessel by which it is shipped, etc. 
In the case of hull insurance the classification is of course 
the most important determining factor, but also the char- 
acter and the habits of the captain and crew, the reputation 
of the management, the route of the voyage, etc., are taken 
into consideration. It was stated by an authority that one 
marine insurance concern distinguished no less than 900 
different factors which enter into the calculations of an 
insurable risk. An attempt is made to put the estimation of 
the risk upon a mathematical basis by giving to each factor, 
affecting the particular case, a certain rating. But as so 
many of the items which enter into the calculation are not 
distinctly measurable and extend into the field of psychology, 

* See Appendix A. 

2 The Guaranty Trust Co., Shipping's Share in Foreign Trade, 
p. 25. 



394 OCEAN SHIPPING 

even the most careful mathematical calculation is bound to 
be vague in certain respects. That explains why under- 
writers frequently differ as to the rate which is to be charged 
for a given risk. 

Rate-making in marine insurance differs from other 
indemnity calculations. — Rate-making in the marine in- 
surance business is far more complex than in other branches 
of insurance. Because of the large variety of risks, the num- 
ber of insurable interests, the extent to which the personal 
element enters, the moral hazard involved, marine insurance 
in contrast to life and fire insurance operates to only a 
limited degree upon a scientific basis. There are no fixed 
marine insurance rates. However, numerous factors lend 
themselves to an approximate measurement of their im- 
portance through statistical tabulation. These are mainly^ : 
the effect of physical forces on various routes of travel or at 
different ports; the inherent quality and characteristics of 
different types of vessels or commodities ; the various 
methods of operating vessels, packing, loading, transhipment 
and discharge of goods ; nationality of the vessel and national 
characteristics encountered in a given trade; the effects of 
seasons ; the duration of the risk ; the effect of trade cus- 
toms; and the loss experienced under various' policy pro- 
visions. 

The only safeguard of proper estimation of risks is there- 
fore minute scrutiny of past experiences in connection with 
a like or similar risk, and above all, a careful cost accounting 
which reveals excessive profits along certain lines and losses 
along others. Unless an underwriter adjusts his rates ac- 
curately on the basis of carefully kept accounts, one of two 
things is apt to happen. If he fixes his rate too high, a com- 
petitor will underbid and take his business; on the other 

^ See S. S. Huebner's Report, pp. 62, 63. 



MARINE INSURANCE PRACTICE 395 

hand, if he fixes his rates too low, he sustains losses which 
in the long run would undermine the foundations of his 
business. Before the war, the normal range of premium 
percentages under ordinary conditions, without unusual 
clauses, ranged between ^ of 1 per cent to 1^ per cent. 
Application for marine insurance. — The following is 
an application^ for marine insurance as used by brokers: 

MARSH & MCLENNAN 

(Marine) 

Insurance Brokers 

80 Maiden Lane 

New York 

Date 19 

APPLICATION FOR MARINE INSURANCE 

Insurance is wanted by 
For account of whom it may concern 
Loss, if any, payable to 
On 

Name of Vessel 
Sailing Date 
At and from 
To 
For$ 
Valued at 
Conditions : 

Rate of Premium % 

Rate of Commission % 

125740°— 20 

Binding MARSH & MCLENNAN (Marine) for Applicant 
Binding Company 

Types of insurance policies. — The contract between 
the insurer and the insured party is known as the insurance 

iFrom "Paper Work in Export Trade,'' Bureau of Foreign and 
Domestic Commerce, Miscellaneous Series, No. 85. 



396 OCEAN SHIPPING 

policy. Many types of marine insurance policies may be dis- 
tinguished. In the first place, the title may signify the prop- 
erty protected, such as cargo, freight, vessel, vessel and 
freight, cotton, coal, etc. Or else, the distinction may be 
based on the kind of risk against which the property is in- 
sured, such as war risks, stranding and collision only, etc. 
Again the distinction is made between "valued" and "open" 
policy. In the "valued" policy the agreed value of the prop- 
erty affected is given, while in the case of the "open" policy 
no value is stated ; it must be ascertained in the event of loss. 
The difference between "floating" and "named" policy is that 
the first is secured by the shipper before he has learned the 
name of the vessel upon which his goods will be shipped; 
but when the vessel's identity becomes known, its name 
is declared to the underwriter and endorsed on the policy 
which then becomes the "named" policy. "Wager," "honor," 
or "P. P. I." ' policies are issued when the insurer does not 
possess "a genuine interest" in the property covered by the 
contract. Since, however, the law recognizes no policies 
without a "genuine interest" of the insurer, such policies are 
not legally enforceable; enforcement depends upon the 
honor or good faith of the parties involved. Policies may 
also be divided according to the time during which they 
protect the insured property. On this basis we distinguish 
between "voyage" policies and "time" policies. In these 
cases property is insured for transit from one point to 
another or for a certain period. 

Insurance Certificates. — Frequent use is made of so- 
called insurance "certificates." These are issued in order to 
give merchants prompt protection ; they are used in con- 
nection with "open" policies which manufacturers or mer- 

1 The letters signify the words policy proof, interest, meaning 
that the policy itself serves as the proof of the interest. 



MARINE INSURANCE PRACTICE 397 

chants making constant shipments abroad take out. for one 
year or even for longer terms. 

They cover all shipments which the insured party may 
make during that period on any vessel or vessels to any 
market or markets. Frequently, several types of "open" 
policies are taken out and when a shipper is ready to ship 
his goods, he notifies the insurance company that insurance 
under "open" policy number so-and-so is desired on this 
shipment ; at the same time giving details as to the value of 
the shipment, the name of the steamer, date of sailing, etc. 
The certificate of insurance is then returned to the shipper 
by the company, whereupon it has the force of all the terms 
of the original policy. The shipper settles his premium, 
customarily, by the month. The "open" policy in this case 
may be compared to a bank account and the certificate of in- 
surance to a check: The certificate is countersigned by the 
insurance company! and thus becomes quasi-negotiable. On 
page 398 is found a facsimile of such a certificate of in- 
surance. 

Legal intricacies of insurance policies. — In reading 
a marine insurance policy, it should be remembered that the 
present policy in substance is more than 100 years old. It is 
therefore a^ product of a time when transportation conditions 
were radically different from what they are to-day, and 
when many terms of the English language conveyed a very 
different meaning from that which they express now. The 
result is that no one not thoroughly familiar with the legal 
interpretation given to various clauses can ascertain the 
meaning which the language of an insurance policy contains 
to-day. It is largely for this reason that most marine insur- 
ance is placed through brokers who are experts in this par- 
ticular field and are capable of interpreting the intricacies 
of this highly technical document to the shipping public. A 



OCEAN SHIPPING 






itllHnJdlB5lciilBi.ar.il 



• UsI tIMIlM « f tOKDOH *] 



Wsiranted free of Capture, Seizure or Detention as per Polt^. 

This policy sball not be vitiated by nay nn Intention a1 error la 
de»criptioB of voyage or inieresi, or by deviatioa, pro\-ided Ibc 
ttme be commuDicaied to inauiers u bood as known lo tbt 
Ufiured, and an additional premium paid ii required, hut h to 
onderBtood and agrMd tbit Ihu daiue does not in any way 
cover the risk of war, riot and/or dm commotion, or prejudice 
the ptuted wording ol the policy excluding tiaki of LluslnAtuiei 

BublMTt to thro* p*r csnt^ partfoulkr avtrsfffc 

Inoludtni risk ot oraft to u>d from 
th» vesaci, •&oh lighter or ormtt to b* 
eensldcrac] u if Mparataly lraur«d. 



¥>E EeE SSS 



II" il%i ''1 i 

..Jit lifiSiZ *5" 3 



a^ ^%i 



IV.6-.L uA' sli 



^ 




^k 151 







esi 
I 



ill fit ^1525^1 

Hit lli'l I i«9 

HhWM i" 

e; ;s g Eg S8 



l^ ^l'gaiiiYMasMi JO axvaiJMHaal ^ 



MARINE INSURANCE PRACTICE 399 

case in point which serves as an illustration of the difficulties 
entailed in interpreting a marine insurance policy is that of 
a certain United States automobile manufacturer who had 
shipped $700,000 worth of his cars abroad, presumably 
fully insured against marine and war risk. When it was too 
late, he discovered that he could have recovered nothing if 
damage had occurred at the most dangerous part of trans- 
portation. Here are given a few explanations, offered by 
Mr. J. 'McMillan Hamilton, President of Hamilton, Wade, 
Inc., of some of the more important clauses and terms con- 
tained in a typical marine insurance policy : 

Terms and clauses explained. — 
"F. P.A. E. C. Clause: 

"Free of Particular Average English Conditions. 

" 'Warranted from average unless general, or the ship 
be stranded, sunk, burned, or in collision.' 

"If the vessel be stranded the insurer has to pay particular 
average without regard to percentage, and whether or not 
the damage is in any way attributable to the stranding. 

"The damage to the goods may have occurred prior to the 
stranding or after the stranding, and from an entirely dif- 
ferent cause, but providing they were on board at the time 
of stranding and the insurance was then in force, the damage 
is recoverable from the underwriters. 

"The same applies to burned, sunk, or in collision, but a 
vessel which might be on fire is not necessarily interpreted as 
burned, nor is a fire confined to cargo covered, and the term 
'or in collision' is interpreted by the courts as if it read 
'with another vessel,' unless otherwise modified in the 
contract." 



400 OCEAN SHIPPING 

"F. P. A. A. C. Clause: 

"Free of Particular Average American Conditions. 

" 'Warranted free from Particular Average unless caused 
by stranding, sinking, burning or collision.' 

"This clause differs from the F. P. A. E. C. clause in 
that the loss must be caused by one of the above-mentioned 
casualties." 

"Per Cent. Particular Average Clause : 

" 'Subject to Particular Average if amounting to — per 
cent.' " 

"The object of this limitation in amount is to prevent an 
endless amount of small claims which would involve expense 
of adjustment without due return. It is often modified to 
divide a single shipment into several units and becomes ap- 
plicable to each. 

"This clause in one of its many modified forms is partic- 
ularly desirable on most classes of merchandise and ma- 
chinery as will be seen by reading the preceding paragraphs." 

"River Plate Clause : 

"The risk under this policy shall cease upon arrival at any 
shed (transit or otherwise), store, custom house, or ware- 
house, or upon the expiry of 10 days subsequent to landing, 
whichever may first occur. 

"This clause is being quite generally insisted on by the 
companies, particularly on policies to Brazil, Buenos Aires 
and the River Plate, as owing to the large number and size 
of shore losses, the marine companies do not care to assiune 
the risk. 

"On insurance bearing this clause, consignee or banks 



MARINE INSURANCE PRACTICE 401 

should be advised to see that other insurance is provided in 
case of lapse before delivery of goods or acceptance of 
drafts. 

"Rioters, Strikers and Locked-Out Workmen : 

"Damage caused by these perils is excluded from the 
general marine cover and if desired must be included by en- 
dorsement. 



Thieves : 

"The term 'thieves' does not cover clandestine theft or a 
theft committed by one of the ship's company, whether crew 
or passengers. 

"Safely Landed: 

"Where goods are insured until they are safely landed, 
they must be landed in the customary manner and within 
a reasonable time after arrival at the port of discharge, 
and if they are not so landed the risk ceases. 

"In Due Course of Transit : 

"A policy, although reading 'from warehouse at point of 
origin to warehouse of consignee at final destination' ; also 
bears the words 'In due course of transit.' These words are 
not carelessly inserted, they have meaning. 

"Seaworthiness Admltted: 

"A clause is often inserted in a policy admitting the sea- 
worthiness of the vessel for the purpose of the insurance. 
Where this is attached to a policy, it is a concession on the 



402 OCEAN SHIPPING 

part of the underwriter that any leak arising must be from 
the peril of the sea."' 

* The Americas, August, 1919, pp. 30-31. 



REFERENCES 

Gow, W. Marine Insurance. (London, 1909). 

Guaranty Trust Company of New York. Shipping's share in 

Foreign Trade. (1919). 
HuEBNER, S. S. Marine Insurance. (1920). 

The Status of Marine Insurance in the United States. (1920). 

Legislative Abstract, etc., s.p. 388. 
Johnson and Huebner. Principles of Ocean Transportation. Chap. 

XVI. (1919). 
National Association of Manufacturers. An Export Order and 

Allied Topics. (1919). 
National City Bank of New York. Various articles in the 

Americas. 
Winter, W. D. Marine Insurance, its Principles and Practice. 

(1919). 



PART VII 
ORGANIZATION AND MANAGEMENT 



403 



CHAPTER XXI 

THE HISTORY OF VESSEL OWNERSHIP AND 
MANAGEMENT 

Shipping trade in mercantilist days. — The highly spe- 
cialized organization which characterizes the present 
steamship business is the outcome of a long evolution 
from the simple to the complex. If we disregard the 
sporadic ventures of ancient times, we might say, that in 
its .earliest beginnings, ocean transportation was rarely 
left to private enterprise, Venice, the Republic, not 
private Venetian merchants sent out the "Flanders 
Fleet" which was commanded by an Admiral. The Han- 
seatic League, a political organization, controlled the 
medieval trade with the northern regions of continental 
Europe. Gild or town control of medieval times de- 
veloped into national control in the days of the mercan- 
tilists. Two distinct phases mark this period. Side by 
side with the adventurers who more often than not had 
at least the clandestine support of their rulers, the great 
chartered companies developed both trade and shipping 
connections. Accumulation of capital in the hands of 
merchants and the perfection of the joint stock company 
as a workable form of business organization made private 
enterprises possible in a field where until then the abun- 
dance of risk and the scarcity of capital had deterred it from 
large participation. Usually the adventurers blazed the 
trail for the chartered trading company. Their successors 
may be recognized in the "Free Traders," i.e., the merchant 
sailers who traded to those sections of the world whose 
trade was not reserved by royal grant to the larger trading 

40S 



406 OCEAN SHIPPING 

companies. It is hardly necessary to name the leading 
chartered companies. The stories of the East India Com- 
pany (English), the West India Company (Dutch), the 
Hudson Bay Company, etc., are too fascinating not to be 
widely known. These companies really performed three 
functions : they were colonizers, merchants, and carriers. 
The colonizing function was the first to go — generally 
during the 18th century. The state absorbed it. But 
trading and shipping remained united considerably 
longer, and not infrequently the merchant-carrier was his 
own shipwright. 

Free traders vs. chartered companies. — As we stated 
before, the work of the trading companies was supple- 
mented by the "free traders," individual merchants who 
traded with territories not reserved by special grant to 
chartered companies. They owned and generally com- 
manded the ships in which they carried their wares. The 
tendency toward restricting the trading monopolies of the 
chartered companies began early. Thus we read in an 
interesting History of New York: "A new era began in 
1638, when, in response to the protest of the patroons, the 
States-General directed the West India Company to abolish 
the monopoly in trade and agriculture, and the right to 
engage in the fur trade was thrown open to the world. A 
further step toward greater prosperity _of trade was the 
abolishment in 1645 of the monopoly of the carrying trade 
between Holland and New Netherland, which the West 
India Company, with an exception in favor of the privileged 
patroons, had hitherto enjoyed. The trade was then thrown 
open to the vessels of private merchants, and the custom 
regulations adopted concentrated all commerce at Man- 
hattan." ' 

1 "Ships and Shipping of Old New York," Bank of the Manhattan 
Company, p. 11. 



VESSEL OWNERSHIP AND MANAGEMENT 407 

Smuggling, trafficking and piracy. — Much of the trade 
carried on by private merchants was of an illegal nature. 
The artificial restrictions of the mercantilist age invited 
smuggling, constant warfare courted privateering, and 
piracy beckoned with large rewards. New York became 
the center of this kind of shipping venture throughout 
the world. In the above-mentioned history we read: 

"When war broke out in 1688 between France and 
Spain, and England joined Spain, New York became the 
principal headquarters for privateersmen and adventurers 
from all Europe, to whom the name "pirates" might justly 
be applied. Many of these, in times of peace, sailed under 
the skull and cross-bones, and for almost fifteen years 
they not only found New York a safe haven, but greatly 
enriched her merchants, a number of whom engaged in- 
directly in piracy through what was called "the Red Sea 
trade." 

"There were two systems by which New York merchants 
profited by piracy. The most daring was straight piracy 
with privateering for a cloak. Heavily armed ships would 
secure from the governor letters of marque entitling them 
to war upon the king's enemies, and then, when safe at 
sea, they would seize any ship they met. The safer plan, 
and. that of the more conservative New York merchants, 
was to fit out an ordinary merchant ship and send it for 
trade to Madagascar, where the pirates had a fortified 
rendezvous. These ships in "the Red Sea trade" would 
leave New York with an oddly assorted cargo of arms, 
gunpowder, cannonballs, strong spirits, and general sea 
stores, and trade with the sea-rovers for Eastern stuffs, 
spices, precious stones, and deep-toned Arabian gold." 

Functional division betw^een shipping and trading. — 
The most interesting question in connection with this evo- 
lution is when, how and why merchandizing gradually 



408 OCEAN SHIPPING 

separated from ocean carrying. The functional division 
between the carrier and shipper presupposes a fair degree 
of safety from pirates, privateers, etc. It needs at least 
some regularity of communication; it requires a, well de- 
veloped system of branch houses, agencies, etc. We 
therefore find, many reasons why the private carrier was not 
at an earlier date superseded by the public carrier. First of 
all, the time consumed in the exchange of correspondence 
and documents referring to the sale of and payment for mer^ 
chandise was such as to almost prohibit the development of a 
public carrying service, whose requisite is found in the sale 
of the cargo to the foreign consigfnee before the departure of 
the vessel. In addition, the present form of consignment 
shipments is based on an extremely high development of 
mercantile organization, which was out of the question a cen^ 
tury ago. In those days it was only natural that the mer- 
chant himself should own and operate the ship and there- 
fore that each vessel should be the trading unit. The small 
sailing vessel then used could easily be filled by the wares 
of one enterprising merchant. It was not essential that 
the merchant should himself conduct the voyage. He might 
entrust his wealth to a reliable captain or to a "supercargo." 
International trade consisted largely of luxuries and exot- 
ics, and only a few firms dared to enter this adventurous 
business. Therefore, both the steady flow of merchandise 
and the multitude of shippers, which characterize the for- 
eign commerce of to-day, were lacking. The need for pub- 
lic carriers did not exist. Finally, the unsettled conditions 
of' the period formed an unsurmountable obstacle to the 
general establishment of regular trade connections. Semi- 
piratical conditions prevailed on the sea, and foreign navies 
vied with privateers and pirates in preying up6n merchant 
ships; ordinary commerce was daring adventure. 
The origin of berth and charter traffic.^The generaf 



VESSEL OWNERSHIP AND MANAGEMENT 409 

transition from private to public carrying began during 
the second half of the l^th century, but does not gain full 
movement until after the Napoleonic wars, and as . far as 
American Merchant shipping is concerned, until after the 
War of 1812. The transition was by no means uniform 
throughout the commercial world. For instance, in Ham- 
burg, according to one source, as late as in the thirties of 
last century it was the rule for merchants to own their own 
ships. On the other hand a text-book on business organiza- 
tion of 1792 ' has this to say on the subject: "Under present 
circumstances, the main incentive for the building of ocean- 
going vessels is the hope of making a profit by chartering 
them out or by putting them on the berth, so that I would 
say that out of every five ships sailing the sea, four are em- 
ployed in that way." The writer explains this development 
by commenting upon the diversity of interests of the mer- 
chants of his time. They traded in too many different 
commodities and with too many different localities to be 
able to keep their own ship permanently and profitably em- 
ployed. 

Timid beginnings of line developments. — There we see 
the origin of our modern charter and berth traffics. But 
contrary to general belief, line traffic is at least as old, if 
not older. The "Bortfahrt" of the early 17th century 
reyeals the existence of public carriers at that time. 

The best-known example is the "Bortfahrt" (low-Ger- 
man "Bort" — Dutch "Beurt" — English line, order) ^ between 
Hamburg and Amsterdam established as early as 1613. At 
that time, in this particular trade, commerce and navigation 
were carried on as two entirely separate functions. Carrier 

ij. G. Busch, Theoretisch-praktische Darstellung der Handlung, 
1792 (Part 11, p. 6). 

2 See Dr. Kurt Giese, Das Seefrachtarifwesen, (Berlin, 1919, pp. 
20#.) See also E. Baasch, Die Bortfahrt zwischen Hamburg, Bre- 
men und Holland. Hamburg 1898. 



410 OCEAN SHIPPING 

and shipper were no longer one and the same. The vessel 
owner's sole source of income wias the freight, which he 
charged on the cargo carried for the account of shippers. 
The ships as well as the officers and crews engaged in the 
"Bortfahrt" had to comply with rigid requirements and 
rules formulated by the interested city governments. !As 
almost all foreign trade in the mercantilist era, also this 
"Bortfahrt" was promoted by 'the governments of the city 
republics concerned, in this case Hamburg and Amsterdam. 
A treaty between the two cities formed the foundation of 
the whole venture and its very details were carefully regu- 
lated. 

The difficulties of maintaining regular sailings and ad- 
hering closely to established sailing schedules were con- 
siderable in those days when capricious winds provided the 
sole power of propulsion. For this reason always two, 
sometimes even four vessels were to be in port simul- 
taneously; if there were only two, one which then func- 
tioned as "Bortmann" loaded first, and left as soon as its 
"Bortzeit," i.e., its stipulated time in port was over, or 
full cargo had been secured. Then the second boat which 
up to the moment of the "Bortmann's" departure had func- 
tioned as "Booglegger,"* became the "Bortmann" and 
another ship came alongside to take its place as "Boog- 
legger." Where four vessels were required to be in port 
simultaneously, two served as "Bortleute" and two as 
"Booglegger." 

Such "Bortfahrten" were arranged in 1613 between Ham- 
burg and Amsterdam, 1702 between Harlem and Hamburg, 
1769 between Hamburg and London. Some time during 
the 17th century a service was established between Amster- 
dam and Rouen. 

1 This word simply denotes a vessel lying next to another one. 



VESSEL OWNERSHIP AND MANAGEMENT 411 

The bulk of the cargoes carried by these early liners were 
general cargo piece goods, not bulk commodities. The 
"Bortfahrten" were to some extent hothouse products, 
being the creation of paternalistic governments, prompt- 
ed by mercantilistic motives. While they continued 
throughout the 18th century, they did not grow along with 
the other trade. 

The early "packets," — The development of the modern 
line traffic does not begin until 1816. From the History 
of Old New York Shipping which was referred to above, 
we quote the following : 

"At the close of the War of 1812 the need of a closer 
commercial relation with the Old World grew so pressing 
that some of the more enterprising merchants of New 
York determined to establish lines of swift-sailing packets 
between the New and the Old World. Accordingly, there 
came into existence in 1816 the famous Black Ball Line, 
the first American packet line between New York and 
Liverpool. It was founded by Francis and Jeremiah 
Thompson, Isaac Wright, Benjamin Marshall, and other 
New York capitalists, among whom the shrewd, far-sighted 
Quaker element predominated. At first the packets sailed 
on the first of every month, and later, as the competition 
of other lines arose, on the sixteenth also. 

"The four original Black Bailers were of only four to 
five hundred tons, but they made the old merchantmen 
appear very inadequate and commanded the best cargoes. 
The Red Star Line, established in 1821 and owned by 
Byrnes, Grimble & Co., the Swallow Tail Line, owned by 
Fish, Grinnell & Co., afterwards Grinnell, Minturn & Co., 
entered the field soon after the founding of the Black Ball 
Line; and by 1822 New York enjoyed weekly packet 
service to Liverpool and a line to London. Between 1822 



412 OCEAN SHIPPING 

and 1832 three lines were established to Havre. Other 
famous lines were St. George's, E. E. Morgan's London 
Line, Spofiford & Tileston's Liverpool Line and E. K. 
Collin's Dramatic Line with vessels named the Sheridan, 
Garrick, Siddons, etc." 

The ownership of these "packets" clearly indicates the 
separation between trade and shipping which had come 
about by this time; "Agents, builders, and captains, all 
were part owners of these packets and speedily grew rich. 
The agent owned perhaps one-eighth of a vessel; the 
builder, in order to secure the job of repairing, which 
averaged $500 on the round trip, possessed another eighth ; 
another eighth was owned by the captain; and perhaps a 
sixteenth was owned by the blockmaker and the sailmaker. 
Competition between the different lines was keen, and the 
tonnage kept increasing, especially after 1842. In 1854 the 
Amazon and Palestine, 1,800 tons each, the largest of the 
Atlantic sailing packets and the last ships of the Morgan 
Line, were launched from their ways." 

In 1824 the first steamer line service was established by 
the General Steam Navigation Company between London, 
Hamburg and Rotterdam. The Royal Mail Steam Packet 
Company started the first oversea steamer service in 1839, 
connecting London with the West Indies and Central 
America. By 1856, line service existed between Europe 
and all other continents, and by this time established sailing 
ship companies replaced their sailers by steamers. But 
until about 1870 liners played only an unimportant part in 
world shipping. 

The history of modern steamship lines. — The table on 
page 413 shows the most important steamship lines founded 
during the 19th century, arranged according to the dates 
of their establishment, by decades. 



VESSEL OWNERSHIP AND MANAGEMENT 413 



NINETEENTH CENTURY LINE DEVELOPMENT 

Tear of Home 

Name oi Steamship Company Establishment Port 

1820-1830 

General Steam Navigation Company ^. 1824 London 

1831-1840 

Austrian Lloyd 1836 Trieste 

Royal Mail Steam Packet Company 1839 London 

Cunard Steamship Company .... . . 1840 London 

Peninsular and Oriental Steam 

Navigation Company 1840 London 

1841-18S0 

Woermann Line 1847 Hamburg 

Hamburg-American Line 1847 Hamburg . 

Pacific Mail Steamship Company 1848 New York 

1851-1860 

Cie des Messageries Maritiraes 1851 Paris 

Allan Line 1854 Glasgow 

British India .Steam Navigation Company.... 1856 London 

Anchor Line ' 1856 London 

North German. Lloyd 1857 Bremen 

1861-1870 

Cie Generale Transatlantique 1861 Paris 

Lamport and Holt, Ltd 1863 Liverpool 

Alfred, Holt & Co 186S Liverpool 

Societe Generale de Transports Maritimes 

a Vapeur 1865 Paris 

White Star Line 1869 Liverpool 

Dominion Line 1870 Liverpool 

1871-1880 

Prince Line 1872 New York 

1872 Rotterdam 

Nippon Yusen Kaisha 1872 Hamburg 

Koninglyke P.aketvaart Maatschappy 1873 London 

German Levant Line 1873 Paris 

German East African Line ....._......_... 1878 London 

1881-1890 

Munson Line 1881 Bremen 

Holland-American Line 1882 Naples 

Kosmos Line 1883 Newcastle- 
New Zealand Shipping Co on-Tyne 

Cie des Chargeurs Reunis 1885 Tokio 

Clan Line 1888 Amsterdam 

Hansa Line 1889 Hamburg 

Navigazione Generale Italiana 1890 Hamburg 



414 OCEAN SHIPPING 

NINETEENTH CENTURY LINE DEVELOPMENT 

(Continued) 

Tear ol Home 

Name of Steamsliip Company Dstablistuuent Fort 

1891-1900 

Leyland Line 1892 Liverpool 

Shell Transport Company 1898 London 

Union Castle Line 1900 London 

Elder, Dempster & Co. .^ 190O London 

Development of "berth traffic." — ^Alongside with the line 
traffic the berth traffic developed. While it probably is no 
older than line service, if we included the "Bortfahrt" in 
it, berth traffic was undoubtedly more important during the 
18th and early 19th centuries. That seems only natural. 
Berth traffic affords almost the same advantages for col- 
lecting a ship load as does the line service without imposing 
the rigidity of a fixed sailing schedule. The traffic in 
early times was too irregular for line service to be able to 
exist except in trade routes possessing extraordinary traf- 
fic density, financial support from the public treasury or 
both. It was more common that the boats that were 
rented or chartered to various shippers were merely "put 
on the berth." In such a case, a shipowner, with the aid 
of brokers who were in touch with the merchants, offered 
his ship for a particular voyage to all who wished to use it. 

Sometimes the brokers would take the initiative, and 
would themselves charter vessels for the purpose of putting 
them on the berth. While this was the customary method 
of shipping general merchandise during the time when line 
traffic had not yet developed, to-day a ship is only occasion- 
ally put on the berth. This occurs more frequently at the 
end of a route, where more freight has been received than 
is ready to be dispatched. A freighter may also be employed 
in berth traffic in order to fight exorbitant liner rates. 

As the traffic in general merchandise grew in volume and 



VESSEL OWNERSHIP AND MANAGEMENT 415 

regularity along definitely established trade routes, berth 
traffic gave way to regular line service which follows defi- 
nite schedules. Vice-versa, the organization of line services 
acted as a strong stimulus to the growth of the exchange 
of commodities. To-day the liner has almost complete con- 
trol over the movement of general merchandise, while bulk 
goods are the domain of the tramp. 

The appearance of the "tramp." — The modern tramp 
owes its existence primarily to the development of world 
trade in bulk commodities. It is much like the early mer- 
chant ship in the method of its operation. The tramps of 
to-day, as most vessels of the 17th and 18th centuries, go 
wherever they please; that is to say, wherever the hope of 
profitable trading opportunity beckons. But apart from size 
and methods of propulsion, there are these big differences 
between the modern tramp and its 18th century prototype. 
The tramp usually carries bulk commodities which move 
jn cargo lots. The 18th century sailer carried general cargo. 
The tramp is invariably chartered out. The early vessel, 
as we have seen, more often than not was not chartered out, 
but employed to carry the merchandise of its owner. 
There was also a marked difference between the i8th 
century charter traffic and the modern tramp service. The 
early charter business used the trip charter almost ex- 
clusively. To-day, when the introduction of steam power 
has practically emancipated shipping from the uncertainty 
of weather conditions, the time charter has become more 
common. 

The revival of the private carrier. — An interesting phase 
of the latest development of vessel ownership is the revival 
of the private carrier. The main reason for this modern 
tendency is to be found in the magnitude of modem cor- 
porations. This has made possible the handling by one 



416 OCEAN SHIPPING 

concern of such vast quantities of coal, iron, petroleum, 
asphalt, fruits and other products that the use of steam- 
ship lines as part of a single business has become eco- 
nomical. 

To understand this development we must ascertain why 
the services of either the modern liner or the modern tramp 
are insufficient to satisfy the requirements of twentieth cen- 
tury shippers. It is true that the modern liner takes lafge 
quantities of bulk commodities, but this portion of the busi- 
ness is looked upon as a by-product. 

The bulk goods serve to fill the space left vacant by the 
better paying general merchandise. It, therefore, follows 
that if commodities, such as steel rails and the like, move 
in directions where general cargo cannot be obtained, it 
does not pay to establish a public line. The regularity and 
the volume of these movements, however, sometimes neces- 
sitate the establishment of regular sailings for the private 
corporation. The result is the private line. 

Another reason for the establishment of private lines may 
be found in the necessity for providing vessels built espe- 
cially to meet the requirements of a particular trade. In 
either case, the same factors that favor the development 
of large-scale production and the consolidation of enter- 
prises along horizontal as well as vertical lines, are also 
applicable to these cases of absorption of the water-trans- 
portation service by the manufacturing or producing cor- 
poration. 

Summary of evolution. — The evolution just sketched 
is summed up in the following diagram, which we reproduce 
from Kirkaldy's British Shipping, p. 167 : 



VESSEL OWNERSHIP AND MANAGEMENT 



417 









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.418 - OCEAN SHIPPING 



REFERENCES 



Baasch, E. Die Bortfahrt swischen Hamburg, Bremen und Holland, 

(Hamburg, 1898). 
BuscH, J. G. Theo^etisch-prakische Darstellung der Handlung, 

(1792). 
GiESE, K., Das Seefrachtarifwesen (Berlin, 1919). 
Johnson and Huebnek. Principles of Ocean Transportation. Chap. 

XVir. (1919). 
KiRKALDY, A. W. British Shipping. Book I. Chaps. I, II, IX and 

X. (1914). 
Owen, D. Ocean Trade and Shipping. Chap. II. (1914). 
Smith, J. R. The Ocean Carrier. Chaps. II, IV-VIII, and XI. 

(1908). 

Organization of Ocean Commerce. Chap.. IV. (1905). 
WusTENDORFER, H. Studicu zur Modernen Entwicklung des See- 

frachtvertrages. (1905). 








1 '-ailH— 1 Ls.-nsU..I 








li:!a!i=-hU:=5S;i^ 




|r„,h, ,„;««„ kl |A,J.^^«« h 




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i^i^a 



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[vtct«iB.^^«K/.tt«>>*| |chj'1tr-"sDq»*tnw.tH^r,) llVryOHcnOTlAyKin| |^doehKxwoatOulp(H»i| |Ge»er^ VAarf Supt [ J Chief of 0)imvJion[ | Hotw Sup«riAndWt| |v.«r^rifaiderf&Bi.i. 




fcrsfcriasrd 




TYPICAL ORGANIZATION OF A LARGE PASSENGER AND FREIGHT STEAMSHIP COMPANY 
From R. S. MacElwee, "Training for the Steamship Business'' 



CHAPTER XXII 

THE ORGANIZATION OF THE STEAMSHIP BUSINESS 

Three types of steamship organizations. — Business 
organization is not standardized. Each company has its own , 
problems to solve and tasks to perform and adapts its organ- 
ization to its peculiar needs. Nevertheless, a type can be 
evolved which includes the characteristic features of the 
individual organizations. But in view of what we have dis- 
cussed in previous chapters, it is clear that one type will 
not suffice to represent all the various forms under which 
shipping services are performed. There must be at least 
one type for line service rendered by common carriers, 
another for private or industrial lines,* and a third fof 
tramps. 

Liner organization. — Let us take up the liner organiza- 
tion first. Each group of liners naturally operates 
under a different form of organization, but by choos- 
ing the most complete and complex type we cover at 
the same time the simpler forms contained therein. The 
following chart, showing the typical organization of a large 
passenger and freight steamship company, was prepared by 
Dr. R. S. MacElwee for a bulletin entitled Training for the 
Steamship Business} 

General features not unusual. — As far as the general 
form of organization is concerned, a steamship company 
does not differ essentially from corporate organizations in 

1 The organization of private or industrial lines follows in principle 
that of other liner companies and requires no separate discussion. " 

"R. S. MacElwee, Training for the Steamship Business, Depart- 
ment of Commerce, Bureau of Foreign and Domestic Commerce, 
Miscellaneous Series, No. 98, Washington, 1920. 

419 



420 OCEAN SHIPPING 

Other lines of business. Stockholders elect directors, who 
in turn appoint the officers, such as President, Vice-Presi- 
dent, Secretary, Treasurer and Controller. The peculiarity 
of the steamship business is brought out only when we 
study the detailed organization of the various departments 
which are in charge of the several managers, such as Passen- 
Vger Traffic Manager, Freight Traffic Manager, Insurance 
Manager and Manager of Operations. 

The manager of operations and his department. — From 
our chart it appears that the Manager of Operations controls 
the largest department of the organization. His division 
comprises two distinct groups of people; those who are 
employed on shore and those whose duties are perfornied 
on board ship. Naturally, this distinction does not affect 
every one of the eight departments which make up the Divi- 
sion of Operations, but it affects the marine, the engineering, 
and the victualling departments, which have probably the 
largest number of employees in the Division of operations. 
. , The traffic man. — The second largest department is in 
charge of the Freight Traffic Manager, and performs such 
commercial or traffic functions as relate to the carrying of 
the cargo. 

"It has charge of the making of freight rates ; of the issue 
and distribution of tariffs or rate cards or instructions as 
to what charges are in effect; of the solicitation and develop- 
ment of freight traffic and the booking oi cargoes ; the issue 
of freight contracts, bills of lading, parcel receipts, shipping 
permits, arrival notipes and other shipping documents ; and 
of the entry and clearance of vessels and to some extent of 
cargoes at the customs house. It selects cargo so As to swell 
the profits of each voyage as far as possible, and considers 
the relative space to be occupied by cargo and fuel. It 
recommends the establishment of new or the alteration of 



ORGANIZATION OF STEAMSHIP BUSINESS 421 

old services ; it examines into the traffic suitability of vessels 
which the owner contemplates purchasing, chartering or 
constructing."^ 

Such an array of duties require exceptional men. Mr. 
Robert E. Annin, himself a practical steamship man, writes 
as follows about the traffic manager:^ 

"His position is at the strategic center of the business and his 
functions are of vital importance. His must be the broadest train- 
ing of any department head. 

"The delivery of cargo in proper rotation ; the issue of permits ; 
the daily adjustments of the ever-shifting, but vital, relation of the 
coming cargo to what is already stowed; the keeping a firm hand 
on the dock; the tactful treatment of the shipper, the stevedore, 
and the "boss" of the office (who casually promises all sorts of 
traffic impossibilities to his midweek golf partners) ; the constant 
watching of the changes in the relation of weight, measurement, 
capacity, draft, and gross revenue; the straightening out of dock 
quarrels over measurements or tallies; the watching of lighters so 
as to avoid demurrage — ^these are all more or less directly put up to 
the traffic manager whenever they become acute." 

He must know ships — types as well as the peculiarities of 
individual ships. He must be able to read statistics. He 
must know traffic and traffic conditions, routes and rates; 
he must know cargo of every character and description, 
and know it accurately. He must be able to interpret the 
trend of the freight market. In short, his knowledge may 
fall but little short of omniscience. To quote Mr. Annin 
once more: 

"He and his department are the heart and the lungs of the busi- 
ness. Fully 80 per cent of the vital work is to be performed or 
supervised, by it. Here is the place whence the revenue comes. 

* Grover G. Huebner, Ocean Steamship Traffic Management, p. 18. 
.^R. E, Annin, Ocean Shipping, p. 135. 



422 OCEAN SHIPPING 

Other departments accomplish, regulate and check up the expendi- 
ture; but the traffic department is where the money-making is 
engineered." 

Organization of the traffic department. — It appears 
that this department falls into three main sections ; one sec- 
tion in charge of a First Assistant Freight Traffic Manager, 
which solicits and handles outgoing freight ; another which 
performs the same service for inbound freight, in charge of 
a Second Assistant Freight Traffic Manager; a third sec- 
tion is directly under the supervision of the Freight Traffic 
Manager and performs either special functions, such as 
establishing a connection with the Produce Exchange, or 
else supervises the clerical and soliciting staff in branch 
offices or agencies in the home country or abroad. All these 
sections have clerical divisions whose main work is the 
handling of the numerous documents used in the freight- 
carrying business. 

Passenger traffic department. — The chart shows the 
organization of the Passenger Traffic Department of a typi- 
cal North Atlantic passenger line. 

In this case the duties are divided in such a way that the 
Passenger Traffic Manager, who is the head of this depart- 
ment, besides generally supervising the entire department 
and deciding on its general policies, has direct charge of 
the cabin service, that is to say, of the passenger business 
exclusive of steerage or third class. Perhaps the most 
responsible task to be performed by the Passenger Traffic 
Manager is that of fixing passenger fares, just as freight 
rate-making is the most important function of the General 
Freight Traffic Manager. Inasmuch as rates and fares, as 
we shall see in a later chapter, are nowadays largely fixed 
by conferences between various lines, the traffic manager 
has to participate in conference meetings where the rate 



ORGANIZATION OF STEAMSHIP BUSINESS 423 

and fare changes are agreed upon. In many cases, confer-i 
ences fix only the minimum rate to be charged and leave 
much to the discretion of the Traffic Manager. 

The organization of the tramp business. — We now 
come to the study of ship brokerage and of the organization 
and administration of chartered vessels. We have seen 
that even to-day, in this age of specialization and increasing 
regularity, tramps or chartered vessels perform the major 
part of the world's seaborne business. The ingenious 
solution of the great world puzzle of bringing together more 
than twenty- four thousand tramp vessels scattered over all 
oceans, enroute to hundreds of ports in all climes, with the 
freight equally scattered, is admirably described by Prof. 
J. R. Smith' in the following way : 



"THe method of securing cargoes for ships, and ships for cargoes, 
is best described by the relation of some common incidents of every- 
day occurrence. A Liverpool shipowner had a steamer in the Medi- 
terranean loaded with jute, which she was carrying from Calcutta 
to Dundee. The owner desired another cargo for the steamer at 
the end of the voyage. Knowing there was nothing in Dundee he 
wrote to his agent in Newcastle, and himself made inquiries among 
the shippers of Liverpool. The Newcastle man suggested a cargo of 
coal to Hamburg, but this the owner declined, and sought the aid of 
his correspondent in Dumbarton, but the iron trade of Dumbarton 
was not promising. Meanwhile, the days were passing, the vessel 
had reached Dundee and there was nothing provided for her. The 
Liverpool man was himself the correspondent of a London firm of 
ship-brokers who telegraphed him at this juncture that they had 
offers of a shipment of German coke to go from Rotterdam to Santa 
Rosalie, lower California, and of another of Cardiff coal for Buenos 
Aires. The first the shipowner declined as being only suitable for a 
sailing vessel, and because of news from across the Atlantic he 
allowed the second to go to a steamer then lying at Antwerp. Three 

' See J. R. Smith's "The Ocean Carrier," pp. 36, 37. 



■i24 OCEAN SHIPPING 

days before this he had cabled to his New York correspondent a 
description of the steamer, and offered his services to carry grain to 
the United Kingdom at a certain rate, saying thi^t she could load 
after a certain date or between certain dates. As New York freight 
was dull, the firm in that city telephoned their Boston and Phila- 
delphia agencies. At the same time a Chicago grain exporter decided 
to export 150,000 bushels of corn, and telegraphed to his agents in 
New York and Philadelphia to secure offers of transportation. In 
the shipping exchanges of those cities the representatives of the 
Chicago exporter and the Liverpool, shipowner bargained face to 
face. Offers were, however made at the same rate by the New 
York representative of the owner of a ship then off Rio Janeiro with 
a cargo of Chilean nitrate bound for New York, and also by a 
Philadelphia broker who sought future employment for a vessel 
then in the Red Sea with a cargo of Java sugar for Philadelphia. 
The wary broker held aloof for a few hours in the effort to beat 
down the rate. The Liverpool owner was informed of this com- 
petition, and still having nothing for his steamer he cabled that he, 
would charter his ship for threepence (six cents less per ton than he 
had offered, or for the same rate he would take freight to Con- 
tinental ports as far as Copenhagen. He added to his cablegram 
the word "range," which means in cable code that he would send 
the ship to the Delaware Bay with the understanding that she might 
be ordered to New York, Philadelphia, Baltimore, or Norfolk to load. 
This offer secured the freight, for the representatives of the sugar 
ship and the nitrate ship, having more time at their disposal, pre- 
ferred to take chances rather than cut rates. The steamer which, 
pending negotiations, -had proceeded to Newcastle, coaled and 
anchored, departed thence in ballast for the Delaware. Meanwhile, 
the Chicago exporter found that railroad conditions made Norfolk 
the most convenient port to which to deliver his corn at the appointed 
time. When the steamer reached the Delaware breakwater (just 
inside Cape Henlopen), the captain received telegraphic instructions 
to go to Norfolk. There he loaded a full cargo of corn and, as the 
final destination of the corn was still undecided, he sailed to the 
Channel port of Falmouth for orders. Upon being sighted there, 
he was "instructed by signal to proceed to Copenhagen, where the 
corn was discharged and the vessel was ready for another contract 
which the agents had been trying to arrange since the day they 
learned of the final destination of the corn cargo." 



ORGANIZATION OF STEAMSHIP BUSINESS 425 

Organization of the charter market. — Until the war 
the world charter market had its center in a few ports near 
the North Sea basin. Here, in close vicinity, located in the 
great European ports, such as Le Havre and Liverpool, 
were the dominions of the great shipping companies of the 
world. Great Britain and northwestern Europe attract num- 
berless tramps, which either seek this section of the world 
as the destination of their cargo or as the source of an out- 
ward cargo. The latter is hardly ever lacking because of 
an endless stream of British coal which flows to almost 
every corner of the globe. 

It is, therefore^ not surprising that the entire charter trade 
is directed from central points located in this part of the 
world; particularly in London, Hamburg and Rotterdam. 
Tramps which come to New York, for instance, do not ordi- 
narily make their engagements here, but are chartered in 
one of these great charter markets of Europe. The cen- 
tralization of the charter market of the world in a relatively 
small area is rendered possible by the development of all 
means of communicatibn, particularly the cable and wire- 
less. The net of international cables and of wireless plants, 
forms the basis of the organization of the modern charter 
market, bringing a multitude of local establishments into 
one great international organization. 

This system of telegraphic communication has been 
greatly improved through the invention of wireless teleg- 
raphy. It was stated in a previous chapter that this inven- 
tion has materially added to safety at sea.' In some respects 
its effect upon the operation of tramps, indirectly upon the 
speculation in, and the marketing of, many of the commodi- 
ties carried by tramps is apt to be even more far-reaching. 
The number of tramps equipped with wireless is constantly 
increasing. Through it the charterer or his agent is kept 



426 OCEAN SHIPPING 

practically in constant touch with his ship. As a result of 
this, the moment when the final destination of the cargo is 
to be determined is postponed still further. But this is only 
one of the manifold effects on the charter business. It 
would lead us too far to make an exhaustive analysis of all 
such results. 

Negotiating a charter. — The fact that negotiations be- 
tween shippers and shipowners' representatives are conduc- 
ted in so-called, exchanges, should not lead to the belief that 
tonnage has in any way become negotiable and can, there- 
fore be traded in generic terms without reference to a par- 
ticular vessel. It is true that phrases such as "handy vessel" 
or "moderate-sized vessel" are found in charter parties, but 
they are invariably supplemented by particulars naming a 
specific vessel. The basis of negotiability is standardization, 
and the considerable progress that has been made in stand- 
ardizing charters and in developing standard types of ves- 
sels has brought it within easy reach of a negotiable point. 

In view of the complex nature of the charter party, it is 
not surprising to find that almost all charter parties are 
carried out through the office of a broker. The merchant 
or manufacturer who wishes to charter a vessel has no way 
of gauging the supply and demand of vessel tonnage. Here 
the middleman is indispensable. The brokers, being in con- 
stant touch with each other, as well as with shippers and 
shipowners, are in a position to exercise a steady and equal- 
izing influence upon the formation of charter rates by pub- 
lishing market conditions in private reports and in such 
papers as Lloyd's List, the Shipping Gazette, Fairplay and 
others. In some cases the broker has authority to act as 
agent for shipper or shipowner. He is seldom a shipowner 
himself. To sum up, we may say that there are altogether 
five persons or classes of persons interested in a charter. 



/ 

ORGANIZATION OF STEAMSHIP BUSINESS 427 

First, the shipper; second, the forwarding agent; third, the 
agent of the ship in the port of loading; fourth, the ship's 
agent in its home port; and fifth, the owner or owners of 
the vessel. 

Methods of tramp operation. — The tramp is oper- 
ated in a number of ways. In the first place it may be 
owned by the master, who then has full charge of the opera- 
tion of the vessel, combining the commercial with the nauti- 
cal function. A similar case is that in which the master is 
part owner, and the holder of the remaining share leaves 
the master a free hand in operating the vessel. Again, the 
owner may entrust the management of his tramp or tramps 
to ship brokers, who are found in almost all ports of the 
world, relying on them to keep his property plying the seas 
as regularly and remunerately as possible. If the owner is 
anxious to reduce the risk involved in the operation of his 
ships to a minimum, and is content with a correspondingly 
low return on his investments, he may time charter his 
vessels for a number of years to operators, who then re- 
charter them, usually on trip charter but sometimes on time 
charter and always at higher rates. 

In England, the country which is, as we have seen, pre- 
eminent in tramp owning, so-called "managing owners," who 
operate fleets of tramps ranging from half a dozen to more 
than one hundred, are not uncommon. These managing 
owners usually own a number of vessels themselves, but 
more often manage ships belonging to others, in which case 
they pay the owner a stipulated percentage of the profits of 
the business. 

General steamship agents. — Still another way of con- 
ducting this part of the shipping business is through the 
General Steamship Operators or Agents. They may be con- 
cerns of considerable size, combining a large variety of 



428 • OCEAN SHIPPING 

functions. They may act as agents for regular line com- 
panies, organize and operate one or more lines made up of 
vessels which they own or charter to a general ship broker- 
age business ; act as ocean freight forwarders ; handle marine 
insurance ; hold the license of a customs house broker and 
manage fleets of tramp vessels. In some cases these con- 
cerns operate as commission houses and merchants. By 
combining so many functions the risk of the business is fre- 
quently reduced. We may even mention a "hedging" opera- 
tion where such a concern does not charter its vessels until 
time contracts have been made with large shippers of sugar 
or other staple commodities, whereby the necessary cargo 
is assured. 

Ship brokerage. — This enumeration of types of tramp 
operators and managers does not sufficiently show the sig- 
nificant part which the ship broker plays in the chartering 
business. Ship brokers are indispensable for the small tramp 
owner and operator and are, useful also to the larger tramp 
operators, managing owners and general steamship opera- 
tors, though the latter are less dependent upon them. 

The broker's business is to establish the contact between 
supply and demand, which means in the case of the ship 
broker between owner and charterer. The owner or his 
representative seeks cargoes and the shipper or charterer 
seeks space. But besides this main work, the ship broker 
sometirties is instrumental in loading, discharging and oper- 
ating chartered vessels. The ship broker is again called 
upon when a tramp awner or operator desides to put the 
vessel "on the berth." Here the ship broker becomes a 
steamship agent; he advertises the voyage, sends notices to 
shippers who are likely to ship in the vessel ; he makes the 
necessary dockinp- arrangements, books freight, arranges for 



ORGANIZATION OF STEAMSHIP BUSINESS 429 

the receipt and loading of cargoes, etc. The following chart 
shows a typical business organization of a large ship broker : 



TYPICAL BUSINESS ORGANIZATION OF A LARGE SHIP BROKER 
|i>i«iiagerI' 



TWO OIITHRH 



FOiEUKCONNEniM 

mcoMEmwam 



0NEO»TWOJUMI8m| I TWO STWOGMPMCTsI 



I enSHIER \ 



cwNicnomn 
cminnwoni 

DTOTIln 

nmicANroiiTT 



Courtesy D. Appleton & Co. 

From G. G. Heubner "Ocean Steamship Traffic Management." 

Former functions of supercargoes.^ — During the war, 
the supercargo official of the steamship organization, 
who, to all intents, had become an obsolete type, or super- 
numerary, experienced a revival. Before the days of cable 
and wireless this traveling representative or business agent 
afloat had been indispensable. Improved means of com- 
munication more and more reduced his usefulness, until 
competition, which does not suflfer superfluous branches in 
a business organization, led to the almost complete disap- 
pearance of the supercargo. 

But the war, by calling forth in a day, as it were, an 
American merchant marine of hundreds of vessels, in more 
than one way created a new condition of aflfairs. It placed 
an enormous tonnage in the hands of a people who were 
somewhat unaccustomed to and unprepared for the task of 
operating such a large fleet of carriers to best advantage. 
*rhe supercargo was restored to help in this emergency. The 



430 OCEAN SHIPPING 

man instrumental in placing supercargoes on many of the 
new freight vessels was Mr. J. H. Rosseter, at one time 
Director of Operations of the United States Shipping Board. 
His argument was this : ^ 

The line, so to speak, of Americans experienced in operation and 
with facilities in foreign countries is altogether too thin. It will not 
stand the strain. Strands have to be added. We have to very con- 
siderably increase the comparatively small group of Americans who 
understand or are interested in foreign commerce. We have to ex- 
pand our experience and our understanding of international prob- 
lems. As a Nation we are absolutely childlike in our viewpomt of 
these problems. We can not do that overnight. The effort must be 
encouraged and stimulated. 

This much mooted question of supercargoes, which has subjected 
me at different times to vigorous attacks, had its inception in the 
theory that it would accomplish the training of young men. It might 
not be amiss to say when I called that first class of supercargoes 
together I saw as fine a body of young men as it has been my pleasure 
to meet for a long while. I was supposed to give them a little talk 
as to what their course would be, and as I talked to them it occurred 
to me that it might be well to give them an offhand examination. 
So I asked these young men, college graduates, men from banks, and 
all walks of life, fine types, such questions as the distance troni 
New York to the Panama Canal, the relative distance from San 
Francisco to the Panama Canal, in which direction the Panama 
Canal took its course, and to give me the names of five principal 
seaports of the world. 

The outcome of the test was such as to prove to Mr. 
Rosseter the absolute necessity of organized scientific train- 
ing of the youth of the land along shipping lines, both by 
theoretical instruction and in the school of life. 

Duties of supercargoes on Shipping Board vessels. — 
The duties of the supercargo were fully explained in Bulletin 

* See Hearings on Establishment of an American Merchant Marine. 
pp. 1965, 1966. 



ORGANIZATION OF STEAMSHIP BUSINESS 431 

No. 828 of the Information Bureau of the Shipping Board. 
We quote the following : 

"The supercargo is first expected to acquaint himself with the 
organization and history of the United States Shipping Board and 
the general duties of a supercargo as they relate to a ship and its 
cargo. Then he is taught enough about marine insurance to learn 
what bearing it has upon the profitable operation of ships. After 
that he must learn what is expected of him in observation and re- 
ports upon other matters. Voyage logs, port logs and history of 
water transportation must be mastered in detail, together with a full 
knowledge of charters, bills of lading, manifests and other routine 
matters aboard ship. The whole course of training is intended to 
develop the faculties of observation and perception in the student 
and unless he shows encouraging response in these lines, his chances 
for entering the service have touched the vanishing point. 

"Once aboard ship the supercargo must still prove himself worthy 
of the important position for which he is training. He must show 
himself tactful, both in his relations with the officers and crew of 
the vessel to which he is attached and with the officers and workmen 
of ports and harbors where his vessel may touch. He is expected to 
make a report embracing practically everything of interest that hap- 
pens, at sea, in port and ashore until his vessel is again tied up in 
her home port. 

"The supercargo of to-day will perform the same duties under 
the advantage of direct telegraphic wireless and cable contact with 
ship operators. He also will act in conjunction with the captain of 
the ship in berthing the ship in foreign ports, in bunkering the ship 
and in all business pertaining to the operation of the ship with the 
object of reducing to a minimum the overhead charges. The con- 
sequent eflfect of such economies through efficient management upon 
freight rates will do much in keeping our shipping upon the seas." 

Reasons for failure. — However, the new institution 
could not resist very long the same tendency to change which 
characterized the other activities of shipping during the 
period of transition from war to peace times. When Chair- 
man Payne succeeded Mr. Hurley, he practically abolished 



432 OCEAN SHIPPING 

the supercargo. His main reason was the constant friction 
between supercargo and master arising out of conflicting 
authority. Theoretically the supercargo was subject to the 
master's authority in all matters regarding the safety of 
ship and cargo. But beyond that, the line was not distinctly 
drawn. When asked by Senator Fletcher on March lo, 1920, 
what he intended to do about the supercargo, Chairman 
Payne said: 

Mr. Payne. Let me say just a word about the supercargo. Of ' 
course, in August we had supercargoes on practically all of the 
ships. Constant controversies arose between the captain- or master 
and the supercargo, and the division of responsibility seemed to 
me to paralyze both. If the captain is efficient and competent, you 
do not need a supercargo. If he is not efficient and competent, he 
is in command of the ship, and unless the supercargo is an excep- 
tional person, he does not do much good. The greatest difficulty 
was, in my judgment, however, that the fact that you put a super- 
cargo on a ship treates in the mind of the captain or master the 
impression that we are suspicious of him, and that instead of rep- 
resenting the Shipping Board, who employs him and pays him his 
salary, he represents the operators, and there is a conflict between 
the operators' side as represented by the captain and our side as 
represented by the supercargo. So that, with such an investigation 
as we gave to the subject, I think most of them concluded that 
wherever we could have a European agency, as a representative in 
the port, to take care of the port conditions, it was much wiser than 
to have a supercargo.' 

The main function of the supercargo in war time was to 
assure despatch. Normal times will render this task less 
difficult. As to the training of American youth, other meth- 
ods may be found. 

^Hearings for the Establishment of an American Merchant Ma- 
rine, pp. 188S/. 



ORGANIZATION OF STEAMSHIP BUSINESS 433 

REFERENCES 

Annin, R. E. Ocean Shipping. Chap. XVII. (1920). 

HuEBNERj G. G. Ocean Steamship Traffic Management. Part I. 

(1920). 
, United States. Department of Commerce, Bureau of Foreign and 
Domestic Commerce. Training for the Steamship Business. Mis- 
cellaneous Series No. 98. (1920). 

Senate Committee on Commerce. Hearings relative to the 
Establishment of an American Merchant Marine. (1919-1920). 
Shipping Board, Bureau of Information, Various Press Notices. 



CHAPTER XXIII 
CONCENTRATION AND COMBINATION 

Aim of combination. — Ever since 1850, more particu- 
larly since 1870, a constant movement towards larger units 
of control has marked the evolution of the steamship busi- 
ness. This tendency has been particularly pronounced since 
the beginning of this century. A trend towards concen- 
tration is found not only in shipping but in most business 
activities. The aim is, invariably, increased profitableness, 
which is achieved in three ways: through an increased 
price or charge for commodities sold or services rendered; 
through a reduction of cost per unit produced ; or through a 
lessening of the risk entailed. Most combinations serve 
one of these purposes, some more than one, and a few all. 

Forces driving shipping to greater concentration — As 
far as shipping is concerned, the causes underlying the 
movement towards concentration have largely to do with the 
increasing financial risk of the shipping business. The ship 
itself has grown costlier, competition more severe and the 
demands made by the shipper more exacting. All this is 
true much more of the liner than of the tramp. The tramp, 
not being bound to a given route, is not exposed to the vicis- 
situdes that depressions, panics, crop failures, etc., bring to 
the liner. The latter has to stay in the service, unless good- 
will, painstakingly built up by years of effort, is to be sacri- 
ficed. Rigidity, in other words, means increased risk, which 
is the greater if the field served by a given line is by nature 
of circumstances not a very lucrative one. 

Growth of the single line. — The simplest form of con- 
centration is represented by the expansion of the individual 
line. This may be achieved either by putting earnings into 

434 



CONCENTRATION AND COMBINATION 



435 



additional ships or by increasing the outstanding capital, rep- 
resented either by stocks and bonds, or indirectly, by absorb- 
ing other companies, or simply acquiring their assets. If 
company A absorbs company B we call it a merger ; but if 
companies A and B form a new company, C, we apply the 
term amalgamation. In the following tables we give the 
names of th% leading steamship companies together with 
the number of ships, and the aggregate gross tonnage. 

Table 1 : — British merchant fleets of over 100,000 tons 
gross : 



Line 



January 1, 1920 



No. of 
Vessels 



Gross 
Tonnage 



Average 
Size 



Pumess Line (including Prince Line) 

British India 

Alfred Holt and Co 

Ellerman Lines, Ltd. (including Bucknall's) 

P. & O. Company 

Elder Dempster and Co., Limited , 

Cunard Line 

White Star Line 

Union-Castle Line 

The Royal Mail Steam Packet Company 

Lamport and Holt, Limited 

Clan Line 

Eagle Oil Transport Company, Limited. 

Anglo-Saxon Petroleum Company, Limited 

T. & J. Harrison _ ,. . _. 

Commonwealth and Dominion Line, Limited.. . . 

Leyland Line 

Canadian Pacific Ocean Services, Ltd 

Pacific Steam Navigation Company, 

Shaw Savill and Albion Company 

Hain Steamship Company, Limited 

City Line 

Federal Steam Navigation Company 

Andrew Weir and Co 

Ellerman's Wilson Line, Limited 

Brocklebank, Thos. and Jno., Ltd 

Anchor Line 

Houlder Line 

Atlantic Transport Line 

Anglo-American Oil Company; Limited 

Donaldson Bros., Limited ■•••a' 

W. R. Smith and Sons (St. Just Steamship Co. 

Ltd.) 

New Zealand Shipping Company., 

China Navigation Company, Limited 

Blue star Line, Limited 

The Western Counties Shipping Co., Ltd 

Allan Line 



197 
163 
81 
107 
63 
94 
34 
29 
62 
64 
63 
60 
32 
55 
48 
29 
35 
21 
35 
21 
42 
27 
19 
29 
59 
24 
19 
30 
18 
30 
24 

22 
14 
64 
17 
17 
10 



924,681 
823,869 
567,610 
564,639 
554,013 
427,941 
398,672 
390,727 
382,178 
353,621 
328,294 
320,377 
282,000 
281,202 
266,647 
222,944 
219,667 
216,999 
216,020 
206,374 
197,448 
189,041 
183,750 
162,813 
162,187 
161,571 
160,953 
156,706 
166,334 
137,693 
137,167 

134,063 

127,078 
122,318 
104,842 
105,636 
103,829 



4,693 
6,054 
7,007 
5,277 
8,800 
4,652 
11,725 
13,473 
7,349 
6,543 
6,194 
5,339 
8,810 
5,513 
6,553 
7,687 
6.273 
10,333 
6,172 
9,779 
4,701 
7,001 
9,671 
5,614 
2,749 
6,732 
8,471 
5,223 
8,630 
4,586 
5,713 

6,094 
9,077 
1,911 
6,167 
6,214 
10,383 



Courtesy o£ The Syren and Shipping 



436 



OCEAN SHIPPING 



Table 2: — American merchant fleet's of over 100,000 
tons deadweight, January 1, 1920 (showing both owned 
and allocated vessel tonnage). 



Company 



Standard Oil Co. o£ New 
Jersey 

Pacific Steamship Co — 

American Line. ....;... 

Barber Steamship Lines. 

Munson Steamship Lines 

Luckenbach Steamship 
Co 

Atlantic Transport Co. 
of W.Va 

W. R. Grace & Co 

Struthers & Dixon 

Ne^ York & Cuba Mail 
S.S. Co 

J. H. W. Steele & Co. . . 

A. H. Bull & Co 

Strachan Shipping Co. . . 

American Hawaiian S. S. 
Co 

Cosmopolitan Shipping 
Co 

Kerr Navigation Co 

Walker & Daly. .' 

Red Star Line 

Pacific Mail 

Pan-American Petroleum 
& Transportation Co. . 

Matson Navigation Co. . 

Texas Co 

Coastwise Transporta- 
tion Co 

Texas Transport & 
Terminal Co 

International Freight 



Corp 

United Fruit Co 

Oriental Navigation Co. . 
Southern Pacific Co ... . 
Williams, Dimond & Co. 

Elwell&Co 

Columbia Pacific Ship- 
ping Co 

Crowell & Thurlow 

Lykes Bros 

Mallory Steamship Co . . 

Robert Hasler & Co 

M. H. Tracy & Co 

Harris, Ma^ill & Co 

Panama Railroad Co.. . . 



Home Port 



New York. . . 
Seattle, Wash 
New York. . . 
New York. . . 
New York. . . 
New York. . . 



New York. . . . 
New York. . . . 
San Fran., Cal. 

New York. . . . 

Texas 

New York. . . . 
Savannah, Ga. 

New York.... 

New York. . . . 
New York. . . . 
New York. . . . 
New York. . . . 
San Fran., Cal, 



New York. . . . 
San Fran., Cal, 
New York. . . . 

Boston, Mass.. 

New York., 



New York. . . . 
Boston, Mass.. 
New York. . . . 
New York. . . . 
San Fran., Cal. 
New York. . . . 

Portland, Ore. 

Boston, Mass.. 
Galveston.Tex, 
New York . . . . 
New York . . . . 
New York. . . . 
New York, . . . 
New York . . . . 



Ships Owned 



No, 



10 



12 



D.w. 
Tons 



456,026 
42,323 
47,346 
27,527 
64,929 

170,225 



63,175 
106,413 



53,298 
' 66,938 



173,779 
' 7l',623 



45,550 

141,888 
60,200 
68,880 

71,300 



96,190 

1,400 

120,456 

187,666 



53,000 
' 43,564 



96,852 



Allocated 
Ships 



No. 



D.w. 
1>ns 



9,030 
344,664 
326,435 
279,844 
238,370 
121,845 



182,734 

127,088 

•231,188 

173,495 
212,130 
136,867 
197,441 

221,000 

193,358 
114,895 
174,607 
169,158 
110,777 

12,775 
73,851 
64,370 

60,029 

127,713 

127,106 

27,883 

119,897 

' 116,888 
96,341 

114,332 

60,535 

112,615 

68,269 

108,424 

107,975 

104,484 

7,168 



Total 



No. 



D.w. 
Tons 



465,055 
386,987 
373,781 
307,371 
303,299 
292,070 



245,909 
233,501 
•231,188 

226,793 
212,130 
203,825 
197,441 

195,879 

193,353 
186,518 
174,607 
169,158 
156,327 

154,663 
134,051 
133,250 

131,329 

127,713 

127,106 
124,073 
121,297 
120,456 
116,888 
115,041 

114,332 
113,535 
112,615 
111,773 
108,424 
107,975 
104,484 
104,020 



• Including 7 sailers of 20,350 d.w. tons. 

Courtesy of Nautical Gaeette. 



CONCENTRATION AND COMBINATION 



43/ 



Table 3: — The tonnage of the four leading Japanese 
s'-eamship companies is stated by the Japanese Ministry of 
.Communication to be as follows: 







March 31, 1920 




Vessels 


Tonnage 
(Gross) 




97 
79 
53 
10 


462,1S5 




318,603 


Kokusai Kisen Kaisha .... ... 


284,676 


Toyo Kisen Kaisha 


90,199 


Table 4: — The tonnage of the three leading French steam- 
ship companies, according to the 1920-21 edition of Lloyd's 
Register are as follows: 




Number 

of 
Vessels 


Tonnage 
(Gross) 




87 
45 
34 


396,419 




245,610 


Chargeurs R^unis 


192,179 



The "Portmanteau Company." — The additional ships 
may be used either to improve one established service or to 
add a new route or line to the old one. If the latter course 
is pursued, the "portmanteau" line is the result. A good 
example of such a "portmanteau" organization is the Cunard 
Line. Scores of services radiate not only from Liverpool 
and other United Kingdom ports to many parts of the 
globe, but even feeder lines are kept up in foreign countries 
and in distant continents. One board of directors in the 
name of a single firm controls the world-wide network of 
lines and services wherever expediency and foreign laws 
permit this method. The advantages sought by such 
methods are primarily reduction of overhead expenses 
and diminution of risk through distribution over as wide 
a field of endeavor as possible. This is achieved by lessening 
the effect of local depression and taking the fullest possible 



438 OCEAN SHIPPING 

advantage of prosperity waves in other parts. This is simply 
an illustration of the business adage : "the broader the basis 
the smaller the risk." 

The following advertisement of sailings illustrates this 
spread of risk: 

FURNESS, WITHY & CO., LTD. 

Steamship Owners, Brokers and Agents 

Regular Services From 

Montreal, St. John, N. B., Halifax, N. S., 
St. John's, N. F., New York, Portland, Bos- 
ton, Philadelphia, Baltimore, Newport News 

and Norfolk. 
To London, Liverpool, Glasgow, Manchester, 
Cardiff, Hull, Leith, Aberdeen and Dundee 

ALSO AGENTS FOR 

Prince Line 

Cargo Services to Brazil, River Plate, South 
and East Africa, also to the Far East. Sail- 
ings on application. 
Furness-Prince Line 
Levant Service — Piraeus, Alexandria, etc. 

Furness-Prince Line 

United States — France Service to Havre 

Furness Line, Cardiff, Leith and Dundee 

Regular Sailings from New York 

Furness Bermuda Line 

from New York 

ALSO AGENTS FOR 

Swedish American Line and 
Transatlantic S. S. Co. Joint Service 

Passenger and Fast Freight Services to 
Gothenburg, Finland & Russian Baltic Ports 

from New York 

Lloydsabaudo 
Fast Italian Mail Steamers carrying passen- 
gers and cargo to Naples and Genoa from 
New York 



CONCENTRATION AND COMBINATION 



439 



The "group." — These "portmanteau lines" in turn 
are usually parts of larger combinations called "groups." 
These groups are affiliations of lines held together partly 
by stock ownership, partly by interlocking directorates, 
partly by agency agreements and by the loose links which 
are known as "community of interest." Usually these 
groups are built around one great personality of national 
and international repute, such as Lord Inchcape of the 
"P. & O.," Sir Owen Phillipps of the Royal Mail and Lord 
Pirrie of Harland and Wolflf. The following chart repre- 
sents the structure of the Royal Mail Group as it existed 
before the war. Additional lines and services have since 
come under the control of this group as the list below shows : 

ORGANIZATION CHART OF A LARGE BRITISH 
STEAMSHIP COMBINE 



ROYAL MAIL 

STEAM 
PACKET CO. 



Lamport & Holt Ltd. 



Pacific Steam 

N«VIC<TIOM Co. 




UNION-CASTLE 
HAILSTEAHSHIPCCtri 



Elder Dempster & CO. Ltd. 



Glen Line 



AFRICAN STEAMSHIP 
I COMPANV 



BRITISH AFRICAN 
STEAM N/>VIGATION CO. 




ELDER DEMPSTER LINE 



POWEL BACON 
AND HOUGH 



IMPERIAL DIRECT 
WEST INDIAN MAIL 
SERVICE 




VALUMA SHIPPING 
COMPANY 



Adapted from Lenze, "Die Konzentration im Seeschiffahrtsaewerbe." 



440 



OCEAN SHIPPING 



The most important groups in British shipping. — ^The 
most important groups of British Lines are:^ 



NAME 



TONNAGE (GROSS) 



Peninsular and Oriental Group: 
Peninsular and Oriental Steam Navigation Com- 
pany 328,714 

Peninsular and Oriental Branch Line 61,122 

British India Steam Navigation Company 740,056 

New Zealand Shipping Company, Limited 115,634 

Federal Steam Navigation Company 107,717}- 1,793,064 

James Nourse, Limited 23,516 

Hain Steamship Company, Limited 174,804 

Mercantile Steamship Company, Limited 21,061 

Union S.S. Company of New Zealand 230,440, 



Royal Mail Group: 

Royal Mail Steam Packet Company 318,394 

Union-Castle Mail Steamship Company, Limited. 304,911 

Pacific Steam Navigation Company 169,993 

Lamport and Holt, Limited 248,336 

H. and W. Nelson, Limited , 70,616 

Glen Line, Limited ; 74,454 

Elder, Dempster and Company, Limited 26,227 

British and African S.S. Company, Limited 103,423 

Elder Line, Limited 34,001 

African Steamship Company 105,590 

Imperial Direct Line, Limited 28,268 

Coast Lines, Limited 17,017 

British and Irish Steam Packet Company, Limited 14,530 

Moss Steamship Company, Limited 25,885 

King Line, Limited 9,632 

City of Cork Steam Packet Company, Limited. . . 3,390 

Bullard King & Company, Limited 29,385 

J. & P. Hutchison, Limited 8,619 

Belfast Steamship Company, Limited 9,910 

Laird Line, Limited 8,979 

G. & J. Bums, Limited 13,973 



1,625,893 



Cunard Group: 

Cunard Steamship Company 235,798 

Anchor Line 67,651 

Anchor-Brocklebank Line 155,310 

Commonwealth and Dominion Line 157,034 

Donaldson Line 16,746 

America Levant Line, Limited 8,758 



631,297 



CONCENTRATION AND COMBINATION 



441 



523,089 



Purness Withy Group: 
Fumess Withy and Company, Limited, (London) 32,095 

FvuTiess Withy and Company (Liverpool) 46,118 

Fumess Withy and Company, Limited (New- 
castle) • 8,503 

Gulf Line, Limited 33,381 

Norfolk and North American Steamship Com- 
pany, Limited 23,817 

Portuguese Steamers 22,932 

Rio Cape Line, Limited 46,622 

British and Argentine Steam Navigation Com- 
pany, Limited 22,376 

Johnston Line. Limited 80,805 

Neptune Steam Navigation Company, Limited. . 31,675 

White Diamond S.S. Company, Limited 11,009 

London Welsh Steamship Company, Limited. . . . 1,386 
Prince Line, Limited 162,370 

Ellerman Group : 
Ellerman and Bucknall Steamship Company, 

Limited 94,869' 

EUerman's Wilson Line, Limited 125,373 

Wilson's and North Eastern Railway Shipping 

Company, Limited 5,852 \ - 262,054 

Westcott and Laurence Line, Limited 8,284 

City of Oran Steamship Company, Limited 23,304 

Barcelona Steamship Company, Limited 4,372 

1 See Annual Report of Chamber of Shipping of the United King- 
dom, 1919-1920; also latest report of Liverpool Steamship Owners' 
Association. The figures for the Cunard Group were kindly supplied 
by the Cunard Steamship Company. 

2 The Cunard Group, at present, is committed to a building program, 
which by far exceeds that of any other group. The completion of 
the program will raise the Cunard group's aggregate tonnage to more 
than 1,000,000 gross tons. 

During the summer of 1919, it was rumored in financial 
circles that a merger, involving the enormous sum of 150 
million pounds, was planned whereby the P. & O., Cunard, 
Royal Mail and Furness Withy groups were to be welded 
together. While this report proved at least premature, these 
companies probably act in harmony on certain questions of 
general policy as is illustrated by their joint participation in 
the financial deal with the Doheny Mexican oil interests.' 

1 See Chapter X : "The Bunkering Problem." 



442 



OCEAN SHIPPING 



The Holding Company. — In this country, combinations 
in the shipping industry as well as in other industries, have 
taken the fornj of a holding company. The most prominent 
example is that of the International Mercantile Marine Com- 
pany incorporated under the laws of New Jersey in 1902. 
The present organization and capitalization appears from the 
•following chart which is taken from the Annual Report for 
the year ending June 30, 1919. 



i/ITER/IATIOM MEKMTile Mar^ company » 5iiB2iDMRy COMPANIES 



I As Of 



taTUntTIOAiU. MUCANTlLt, MARtflC COtVUfl 
MOjM** OvTiniun* •ifiUHf tf 



JunEl'^1919' 



iTunnc liMsmT Cotvut* 




From the Company's 1919 Annual Report. 

Several points in this chart require a word of comment. 
In the first place, the well-known American Line does not 
appear on this chart although it is a part of the "I. M. M." 
system. The reason is that as far as the boats of the Amer- 
ican Line are concerned the International Mercantile Marine 
Company of New Jersey acts as owner and operator, so that 



CONCENTRATION AND COMBINATION 443 

the' name of the American Line does not appear at all in the 
organization chart although it plays a prominent part in all 
the advertisements of this combine. 

Secondly it should be pointed out that the "Societe 
Anonyme de Navigation Belge-Americaine" is the well- 
known Red Star Line. The Ocean Steam Navigation Com- 
pany, Ltd., is better known as the White Star Line. 

The "I. M. M." — It appears from this chart that the 
British companies, are controlled indirectly through a second 
holding company, incorporated in the United Kingdom. 
Some of these companies are completely controlled, others 
only partly. Particularly in the case of the Holland- America 
Line, the connection is only a loose one. The partial control 
over the New York shipbuilding company will be discussed 
later. 

The International Mercantile Marine Company, since its 
organization in 1902 by John Pierpont Morgan, has passed 
through periods of financial difficulties partly owing to over- 
capitalization. When the war broke out the company was 
in the hands af a receiver with over 80 per cent, of ac- 
cumulated preferred stock dividends due to the stockholders 
and was unable to meet fixed charges. The war with its in- 
flated freight rates was the salvation of the company. The 
receivership was terminated and a considerable amount of 
"water" was eliminated. 

The agreement between the International Mercantile 
Marine Company and the British Government concluded in 
1903, which obligates the American holding company not 
to pursue a policy injurious to the British merchant marine 
or to British trade has repeatedly attracted wide attention 
and has occasionally aroused bitter feelings. The question 
became acute in connection with the allocation of Shipping 
Board tonnage. As a result, late in January, 1921, the 



444 OCEAN SHIPPING 

Shipping Board began a formal investigation into the 
status of this corporation. The bearings have, in the mean- 
time, been concluded, but the decision of the Board has not 
yet been announced.^ 

An anomalous situation. — ^The International Mercan- 
tile Marine Company finds itself in a most unfortunate 
position. Nominally this company with its 1,015,000 tons 
of shipping may lay claim to the title of the premier Ameri- 
can steamship organization. On the other hand, only 13 
per cent of this tonnage is of American registry, while 
more than five-sixths of the total tonnage owned is under 
the British flag. The result is that tne company's actions 
are viewed with suspicion on both sides of the ocean. In 
order to end the anomalous situation, the company in 1917 
attempted to dispose of its holdings in British steamship 
enterprises for $135,000,000 with the idea of investing this 
sum in American vessels. The plan was not approved by 
the American stockholders. The Shipping Board is now 
expected to recognize the difficult position in which the 
company finds itself and should take the initiative in sug- 
gesting a plan of operation under which the company may 
obtain a clean bill of health. 

The Harriman Combine. — Another prominent Ameri- 
can steamship combine is that grouped around the person of 
W. A. Harriman, son of the famous railroad magnate. 
The combination is sometimes referred to as the American 
Ship and Commerce Corporation, sometimes as the United 
American Lines, Incorporated. Previous to the latest reor- 
ganization, the chief holdings* in shipping concerns were 
as follows : 

1 February 20, 1921. 

2 Nautical Gazette, June 12, 1920, p. 879, and August 14, 1920, p. 197. 



CONCENTRATION AND COMBINATION 445' 

Kerr Navigation Co., Inc.. owning 10 vessels of 77,605 D. W. Tons- 
operating 10 " " 106,484 " 

Livermore, Dearborn & Co-operating 42 " " 157,436 " " 

Shawmut Steamship Co owning 3 " " 21,000 " " 

American-Hawaiian Steam- 
ship Co owning 16 " " 174,330 " 

Coastwise Transportation 

Co. (Boston) owning 10 " " 76,500 " 

613,355 D. W. Tons 

The method of control is both complicated and interest- 
ing; interesting because it reflects the diversity of the , 
various incorporating laws of different States and is a 
typical example of the way in which a corporate organi- 
zation strives to reap the benefit of the most favorable 
features of the various State laws. The following is a 
statement of the relationship between the various com- 
panies supplied the writer by one of the officers of the 
American Ship and Commerce Corporation: 

"American Ship and Commerce Corporation is a hold- 
ing company organized under the laws of the State of Dela-_ 
ware, owning only the majority shares of American Ship 
and Commerce Navigation Corporation — organized under 
the laws of the State of New York, formerly known as the 
Kerr Navigation Corporation — and the majority shares of 
the Wm. Cramp & Sons Shipbuilding and Engine Works; 
also the majority shares of the Shawmut Steamship Com- 
pany, a Boston corporation. 

"Grouped with these companies — ^but with no direct finan- , 
Cial affiliations — is the American Hawaiian Steamship Com- 
pany, which in turn owns the majority shares of the Coast- 
wise Steamship Company. ; 

"The operating activities of all these owning steamship- 
companies is centred in the United American Lines, Incor- 
porated, which company is purely an operating company 
and does not own a single steamer. The stock of United 



446 



OCEAN SHIPPING 



American Lines, Incorporated, is held jointly, in equal parts, 
by the American Ship and Commerce Corporation's sub- 
sidiary, American Ship & Commerce Navigation Corpora- 
tion, and American Hawaiian Steamship Company. 

"United American Lines, Incorporated, in addition to 
acting as operating agent for the above-named steamship 
companies, also acts as United States Shipping Board 
operator for steamers in the service from New York to 
the Near East, Java and the Straits Settlement. 

"The Harriman shipbuilding corporation, known as Mer- 
chants Shipbuilding Corporation, with plants at Bristol and 
Chester, Pennsylvania, is not in any way affiliated with the 
United American Lines, Incorporated, because United 
American Lines, Incorporated is not a shipowning or ship- 
building company but a ship-operating company." ' 

The following organization chart gives a clear conception 
of a complex matter : 



WStyrt 



Harriman 
Marine 
Interests 



WAriarrmonaCa 
Marine AecUrlTifS 



wpcrampaaons 



American ^ip Br 



aiTwrlcon-nawaiian 



<%< 



,. La.verne I ShowmutSttonshipCa 



federal i^eti 
foundry Co. 



Qtion Co 
»C00<10M 



Inttrcorpwotc Owntd 
Operates Ships Of 



Unfriun-HmKiiion 



sn-HmK 
Line 



""TooMwiae 
TromportaUon 



'^rchontsrilpbwildHii; 

juo PrefefTid 
jnom Common 
No Par 



aqenta rorHombum 
AmrriconMnrnvups 



'isfs'> 



OBtumunoN or xn HAm AMD VAlm diBuiUH lusiniB pbdpbbtib 
Courtesy Marine Review. 

• Since this was written the Harriman Marine Interests have fur- 
thermore branched out into the export coal business with the forma- 
tion of Warren Export Coa! Company in January, 1921. 



CONCENTRATION AND COMBINATION 



447 



The American Ship and Commerce Corporation attracted 
much attention when it was announced that an operating 
agreement with the Hamburg-American Line had been 
reached. According to this agreement, which seems to have 
the support of the Shipping Board, the United American 
Lines, Incorporated will operate ships — ^partly ex-German 
Liners — over the trade routes formerly served by the Ger- 
man line, taking advantage of equipment and organization 
which the Germans had acquired and developed in the days 
before the war. A less far-reaching contract exists between 
the United States Mail Steamship Company and the North 
German Lloyd of Bremen. 

The A. G. W. I. combination. — Another prominent ex- 
ample of shipping combination is the case of the Atlantic 
Gulf West Indies Steamship Lines which we mentioned in 
a previous chapter in connection with the formation of the 
Atlantic Gulf Oil Corporation of Virginia of which the 
A. G. W. IL. Lines own 53^ per cent. The following 
table shows the most important subsidiaries of the A. G. 
W. I. Lines and their marine equipment. 

MARINE EQUIPMENT OWNED AND OPERATED BY 

ATLANTIC, GULF AND WEST INDIES STEAMSHIP 

LINES AND SUBSIDIARY COMPANIES 

DECEMBER 31, 1919 





No. of 
Ships 


D. W. 
Tons 


No. of 
Tugs 


D. W. 

Tons 


No. of 
Lighters 


D. W. 

Tons 


A. G. W I. S. S. Lines 


12 
21 
14 
14 

"%" 
3 


41,076 
55,032 
61,047 
66,023 

38',2i6 
7,212 


' i" 

2 
6 
2 

"3" 
...... 


■ ■ ' i85 
186 
750 
261 

"iia 

■■"26 


"36'" 
24 
29 
36 

"i7" 

1 

"■3" 


'lV,22S 




8,376 


N. Y. & Cuba Mail S. S. Co. . 
Cia Cubana de Nav. . . . ... . . 

N. Y. & Porto Rico S. S. Co. . 

<!rtiit>ipm S S Co 


11,856 
9,208 


Jacksonville Lighterage Co. . 

Tampa Towing & Lighterage 

Qq 


2,626 
136 








Santiago Terminal Co 




1,050 


Totals 


73 
14 


268.599 
172,400 


16 


1,515 


146 


44,463 


Building: _ , . 

A. G. W. I. S. S. Lines 






87 


440,999 


16 


1,615 


146 


44.463 



448 OCEAN SHIPPING 

Horizontal and vertical combination contrasted. — So 

far we have confined our attention to the so-called horizontal 
combinations ; but the movement towards concentration goes 
further. On the one hand, shipping interests branch out 
into new fields, on the other they are being absorbed by 
outside interests. In each case, we speak of vertical com- 
binations or "integration," a term which covers combina- 
vions ot enterprises, engaged in the same field, but not in the 
same stage of production. 

We begin with that group of combinations in which ship- 
ping plays the active part in supplying the stimulus towards 
concentration. In the lower right-hand comer of the chart 
showing the organization of the International Mercantile 
Marine Company, we note the name of the New York Ship- 
building Corporation, 16.5 per cent, of whose capital is held 
by the Atlantic Transport Company. Here we have the 
most natural vertical combination in the shipping field. 
The shipowner wishes to assure for himself prompt 
service and due attention to his new orders as well 
as to his repair work, and at the same time wishes to share 
in the profits accruing from this business. Two other ship- 
ping companies are interested in the same shipyard — ^W.R. 
Grace and Company, who control the Merchant Line, and 
the Pacific Mail Steamship Company. The three shipping 
concerns just mentioned enjoy in common the particular 
interest of the American International Corporation, a sub- 
sidiary of the National City Bank of New York, and it is 
probable that the joint control of these steamship lines over 
the New York Shipbuilding Corporation was conceived and 
executed by American International interests. Another 
example of this type is the above-mentioned Harriman 
combine. 

Shipping assures fuel supply. — ^The next important 



CONCENTRATION AND COMBINATION 449 

field into which shipping concerns have projected the ten- 
tacles of financial control is that of the production and dis- 
tribution of fuel, both coal and oil. Before the war the 
Hamburg-American Line was said to be interested in the 
Rhenish Westphalian Coal Syndicate for the purpose of 
assuring its supply of bunker coal. In our chapter on "The 
Bunker Problem" we have mentioned two prominent cases 
of shipping concerns buying up oil interests, the one referred 
to a subsidiary formed by prominent directors of leading 
British shipping companies for the purpose of assuring a 
certain supply of fuel oil from a Mexican oil field of Mr. 
Doheny's, the other to the Atlantic Gulf and West Indies 
Company, whose purchases of Mexican oil property were 
much more for the purpose of sharing in the remunerative 
business of carrying oil from Mexican fields than for the 
purpose of guaranteeing a bunker supply.'' Other instances 
could be cited but the foregoing will suffice to show the 
tendency. 

Shipping branches into financial enterprises. — Another 
territory which steamship companies are begiiming to in- 
vade is banking. It is characteristic of British steamship 
methods to take care of the by-products of the shipping in- 
dustry. The late Sir Alfred Jones, a well-known Liverpool 
shipowner, is generally regarded as a pioneer in the field. 
To further the steamship business with West African ports 
he founded the Bank of British West Africa, which later 
passed under the control of Lord Pirrie and Sir Owen 
Phillipps as part of the Elder, Dempster deal. The latest 
development is the formation of the Peninsular and Oriental 
Banking Corporation with a capital of five million pounds, 
and with Lord Inchcape, chairman of the "P. & O.," at its 

1 See Chapter X : "The Bunkering Problem." 



450 OCEAN SHIPPING 

head. On this side of the Atlantic, two similar cases can be 
cited that of the recently established banking house of W. 
A. Harriman and Company, a concern affiliated with the 
Harriman shipping and shipbuilding interests and organized 
for the special purpose of pushing the sale of marine secur- 
ities. The other is the case of W. R. Grace and Company, 
which will be taken up later in a different connection. This 
development may go one step further by entering the marine 
insurance field. Again the Harriman combine is a case in 
point with its control oyer Monks, Goodwin & Shaw, a 
marine insurance company. 

Shipping absorbed by producing interests. — We now 
come to those forms of vertical combinations where ship- 
ping plays a secondary part and is itself absorbed or ac- 
quired by other primary interests. Those may be found in 
all branches of economic activity — extracting, manufac- 
turing, trading and railroading. 

In some cases all these activities are joined into one huge 
organization. Consider the ramifications of the Standard 
Oil Company, or the Royal Dutch Shell, or any other of the 
very large oil companies. Their activities embrace extrac- 
tion, land transportation, manufacturing, marketing and ship- 
ping operations. The original idea in the case of these oil 
companies was to provide the especially-fitted type of carrier 
which their product requires. But the tendency to-day is to 
go into the shipping business as common carriers, at least on 
the return voyage, so as to assure the greatest possible econ- 
omy and paying value. This development has reached an ad- 
vanced point in the case of the United Fruit Company, which 
also began its shipping ventures by carrying only its own 
products, which, like oil, require specially adapted vessels. 
To-day the "Great White Fleet" is one of the most important 
common carriers on the routes converging in the Caribbean 



CONCENTRATION AND COMBINATION 4Sl 

Sea. It is rumored that the United Fruit Company will, in 
the not too distant future, develop into an important oil pro- 
ducer. This expectation is based upon the fact that the vast 
stretches of tropical land owned by the United Fruit Com- 
pany lie within the oil bearing belt of Central and South 
America. The United Fruit Company is also an important 
sugar cane producer and sugar refiner and as such works on 
common ground with the American' Sugar Refining Com- 
pany, another corporation which has become, or is about to 
become, an important shipowner. The molasses tankers of 
the American Sugar Refining Companygwill also be equipped 
in such a way that a certain amount of general cargo can be 
carried.* 

The case of the steel industry. — Another industry 
which has absorbed shipping to a considerable extent is the 
steel industry, particularly as it is represented by large com- 
binations such as the Bethlehem Steel Corporation, the 
United States Steel Corporation, and the recently organized 
British Steel Corporation. Of these the Bethlehem Steel 
Corporation is in a rather unique position because it largely 
depends on Cuban and Chilean sources for its ore supplies. 
Its interest in shipping, therefore, originally centred around 
the carrying of ore by specially built steamers. The latest 
plan is to develop a type of boat which will take oil on the 
outward voyage and ore when homeward bound. The 
United States Steel Corporation, on the other hand, depends 
largely on Lake Superior ore. Its ore vessels, therefore, 
plow the waters of the Great Lakes, taking coal in return. 
Besides this, however, the United States Steel Corporation 
through the United States Steel Products Company, owns 
extensive fleets augmented frequently by chartered steamers, 
carrying its own ore products to foreign markets. More- 

1 Cf . Chapter XIV. 



452 OCEAN SHIPPING 

over, of late, the United States Steel Corporation is enter- 
ing the shipping field as a common carrier, through the 
medium of the New York and South American Line and 
the recently formed Isthmian Line, whose boats ply from 
the Atlantic to the Pacific Coast of the United States through 
the Panama Canal. The shipping interests of the British 
Steel Corporation, whose center of gravity lies in Eastern 
Canada, are represented by the Canadian Steamship Line. 
All these steel "trusts" are important shipbuilders. The 
Bethlehem Steel Corporation Ltd., through its subsidiaries, 
has large shipyards ^t Fall River, San Francisco, Elizabeth- 
port, Wilmington and Sparrow's Point. The United States 
Steel Corporation, during the war, developed two enormous 
plants at Kearney and Thickersaw, Alabama, while the yards 
of the British Steel Corporation are located at Port Arthur, 
Lake Superior, Levis, opposite Quebec and Halifax. 

Other examples. — A case on the border line between 
producing and trading interests is that of the Cambrian Coal 
Combine, an organization prominent in the British coal 
export trade whose various parts were brought together by 
the organizing genius of the late Lord Rhondda. 

The best example of merchants branching out into the 
steamship business is that of ^. R. Grace and Company, 
whose merchant line was mentioned before, and that of 
Gaston, Williams and Wigmore, who operate a fleet of 
steamers known as the "Globe Line." 

Railroad control over steamship lines. — It would lead 
us too far to give, -even approximately, an idea of the extent 
to which railroads have extended their service beyond the 
boundaries of their domain on terra firma. We con- 
fine ourselves to some of the more important facts. The 
Pacific Ocean, because of the length of passage and the ab- 
sence of purely local trafific, seems to be the natural sphere 



CONCENTRATION AND COMBINATION 453 

of the railroad-steamship line. Until recently the Pacific 
Mail Steamship Company, controlled by the Southern Pacific 
Railroad, divided the field with the Great Northern Steam- 
ship Company of the Hill roads, the Pacific service of the 
Canadian Pacific Railroad and certain Japanese lines. Of 
these the Canadian Pacific Company, with its lines on 
both oceans, is by far the most powerful of all the railroad- 
steamship lines. It is encouraged and subsidized by the 
British and the Dominion governments and has done much to 
build up the trade and commerce of our neighbor in the 
North. United States railroads have proved their enter- 
prising spirit by establishing trans-oceanic services on the 
Atlantic. Thus, the Pennsylvania Railroad Company par- 
ticipated in the establishment of the American Line to Liver- 
pool. The Johnston Line from Baltimore to Liverpool was 
originally owned by the Baltimore and Ohio Railroad. 

Foreign railroad-steamship lines. — In England the 
railroad-owned steamship line is common in almost all the 
shorter routes from ports on the east coast to the Continent 
and also in the service across St. George's Channel and the 
Irish Sea, separating Ireland from Great Britain. Thus the 
North Eastern Railway runs a line in its own name from 
Hull to a large number of continental ports. The Lancashire 
and Yorkshire Railroad has services to nine ports of the Con- 
tinent and to Scandinavia. The British railroads have, thus 
far, not entered the trans-oceanic business ; and there is little 
reason to believe that they will do so in the future, because 
of the splendid steamer connections between almost all ports 
of moderate significance. The oversea needs of the country 
seem to be adequately covered now. 



454 OCEAN SHIPPING 

REFERENCES 

Chamber of Shipping of the United KIingdom. Annual Reports 
for 1919-1920 and 1920-1921. 

HocHSCHiLLER. Lcs Trusts de Navigation Trans-atlantique in Journal 
des Economistes. Dec, 1913. 

International Mercantile Marine Company and other large 
shipping concerns. Annual Reports. 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XX. (1919.) 

Lenz, p. Die Konsentration im Seeschiffahrtsgewerhe. (1914). 

Liverpool Steamship Owners' Association. Annual Reports for 
1919-20 and 1920-21. 

Meade^ E. S. The Capitalisation of the International Mercantile 
Marine Company in Political Science Quarterly. Vol. XIX, 
1904, pp. 50-65. 

Owen, D. Ocean Trade and Shipping. Chap. II. (1914). 

Thiess. Organisation und V erbandsbildung in der Handelsschiffahrt. 
(1903). . 

United States. Commissioner of Corporations. Transportation by 
Water in the United States. Part IV. Control of water carriers 
by railroads and by shipping consolidations. (1912). 
Special Diplomatic and Consular Reports dealing with methods 
and practices of steamship lines engaged in the foreign carrying 
trade of the United States. (1913). 

House Committee on the Merchant Marine and Fisheries Pro- 
ceedings in the Investigation of Shipping Combinations. (Vol. 
IV, "Report on Steamship Agreements and Affiliations in the 
American Foreign and Domestic Trade," by S. S. Huebner.) (4 
Vols. House Doc. No. 805, 63 Con., 2 Sess., 1914). 



CHAPTER XXIV 
POOLS, AGREEMENTS AND CONFERENCES 

Network of agreements supplements combinations.— 
The movement towards concentration described in 
the previous chapter is supplemented and aided by 
numerous agreements and conferences, some of which 
are again reinforced by pooling arrangements. To the 
extent that concentration is based on ownership rela- 
tions, pools, agreements and conferences become less 
important, at least in number. This does not mean that 
the conference is less important to-day than before the 
war. On the contrary, the war, through the temporary 
elimination of German competition and the subsequent 
strengthening of British supremacy in such trades where 
American enterprise does not yet appear as the new 
rival, has solidified, though changed, the old agreements. 

Important investigations. — Careful investigations 
carried on by the governments of both this country and 
Great Britain have revealed the nature and the scope of 
almost all shipping rings, conferences, pools and other agree- 
ments existing at the respective period during which the 
investigations were made. In the United States the investi- 
gation of shipping combinations carried on in 1913 by the 
House Committee on the Merchant Marine and Fisheries, 
showed that the advantages of shipping combinations 
are greater than their drawbacks. It was found that, 
contrary to popular belief, shipping combinations were 
not confined to American trade, but were universal in 
their nature and not necessarily directed against the interests 
of the United States. 

455 



456 OCEAN SHIPPING 

The government investigations referred to above 
brought out with striking clearness the fact that no 
combination of lasting influence and large scope can 
exist among tramp vessels. To organize the numberless 
tramps whose ownership is scattered among hundreds 
of individuals and companies, is an impossibility. Tramps 
are quickly built. A broker will soon find cargoes and 
by slightly cutting the rate, the new competition will 
secure abundant and profitable employment), leaving 
idle the boats which, bound by their agreements, must 
charge the higher rate. Mr. Robert Edwards Annin writing 
for the Nautical Gazette (Dec. 11, 1920), gives a 
dramatic account of the difficulties of tramp organization. 
Coming from a practical steamship man, this version is 
especially valuable. In part Mr. Annin writes as follows: 

"To be effective, a general agreement of this sort must 
include all the maritime nations of the world. Under 
strained conditions, when rates are being maintained with 
difficulty, the news that someone is cutting acts upon the 
trade a good deal like the cry of treachery on a hard- 
pressed army. It causes a general sauve qui peut. Uni- 
versal good faith would be the prime condition of success 
in such an enterprise ; and such good faith would have to be 
generally shown not only among American shipowners, 
operators and agents; among the same class in England, 
France, Italy, Scandinavia and Japan ; but in Java, Sumatra 
and the Malay Archipelago; East of Suez, ("where there 
ain't no ten commandments") ; in Egypt, where the science 
of bunco-steering had risen to the level of a fine art 2,000 
years before the Christian era ; and in India, where Kipling 
once said that one could buy a murder case, complete (in- 
cluding the corpse and witnesses) for 54 rupees. 

"At this stage of the investigation, the problem of main- 



POOLS, AGREEMENTS AND CONFERENCES 457 

taining tramp rates by agreement becomes appalling. The 
attempt thus to regulate the world's rates would be both 
expensive and futile. Granted an army of well-intentioned 
auditors, the individuals composing it would be human and, 
therefore, subject to temptation. Who could keep them all 
straight? As Mr. Juvenal once remarked, q'tiAs custodiet 
ipsos custodes; which being interpreted is to say: 'Who 
will keep tabs on the auditors?" 

"Again, assuming for the sake of argument that rates 
could be maintained, every other material condition of char- 
ters and agreements would have to be standardized, and such 
conditions enforced by an all-embracing authority. This 
would involve a reduction to uniformity of thousands of 
charter forms used by thousands of operators in hundreds 
of ports all over the world. The effect of maintaining rates 
only, and leaving other conditions discretionary, would be 
like covering the bottom of a colander, and leaving the 
sides untouched. The bottom would be tight, but the side 
holes would work overtime. 

"There are few trades in which the opportunities for hid- 
den concessions are as great as in the chartering of tramp 
ships. It is impossible to foresee what sharp corners would 
be cut, or what sinuous turnings would be used by owners 
or agents, when confronted with the choice of beating the 
agreed rates, or having their ships lie idle. An agent could 
offer specially lenient terms as to tendering and cancelling ; 
long lay days; low demurrage; high despatch money; all 
carefully adjusted to the benefit of the charterer. Charter 
forms might be provided where charterers paid for load- 
ing and discharging, receiving an inordinate allowance 
therefor. Allowances for extra insurance could be 
made. These are simply a few of the possible Occidental 
methods of evading the letter, while violating the spirit, 



4S8 OCEAN SHIPPING 

of a rate agreement. "East of Suez" the imagination fails ! 

"One can imagine that the maintenance of rates on oc- 
casional ships might be intimately connected with the 'ab- 
sorption of back charges' from Copra schooners among 
the purple isles of the Pacific; the compensation of dark- 
skinned canoemen in the upper waters of the Congo; or 
the watering of eight-day camels amid the sandy wastes of 
Sahara." 

Absence of tramp organization. — We see the difficulties 
which a promoter of tramp owners' associations has to face 
are as numerous as they are great. Nevertheless, attempts 
at bringing about such organizations have been made. 
Many associations formed to protect their mutual in- 
terest manifest their willingness to co-operate and show 
their possession of the necessary esprit de corps. But 
every attempt to control charter rates has proved futile, 
in spite of the strong feeling of solidarity which prevails 
among large groups of tramp owners. 

Several attempts have been made at such rate control. 
Whenever a serious depression befalls the shipping in- 
dustry, the desire to raise the rate level to a profitable 
height by concerted action is naturally strong. Thus, 
the formation of the "Sailing Ship Owners' International 
Union," with headquarters at London, was largely a 
result of the slump in the general rate level which oc- 
curred after the extraordinary boom caused by the Boor 
War. A secondary factor was the large subsidies which 
the French government, unlike other governments, was 
granting to the sailing ship owners of that country. 
The Union was organized in 1904, and in 1905 the ton- 
nage interest covered by the Union's agreement repre- 
sented as much as 87 per cent of the British, French 
and German sailing tonnage. Yet, in spite of this large 



POOLS, AGREEMENTS AND CONFERENCES 439 

membership, the work of the Union met with but little 
success. 

The scope of the Union was limited to minimum 
rates ; (2) to certain long voyages ; (3) to voyages home- 
ward to Europe only ; (4) to vessels of certain sizes only ; 
(5) to sailing vessels only; i.e., to vessels which to-day 
do probably no more than five per cent of the work of 
ocean transportation. 

Very exceptional conditions have led to the organization 
in New York of "The Tramp Steamer Bulk Cargo Confer- 
ence." This represents steamers owned by the United States 
Shipping Board employed in tramp service. It has the 
backing of joint ownership. It will be discussed more fully 
in a later chapter. (For "By-Laws and Regulations" see 
Appendix "H.") 

Still more restricted in the scope of its activities in 
the "Baltic and White Sea Conference" which was or- 
ganized in 1905 in Copenhagen. It does not attempt any 
rate control whatsoever, but confines itself to matters 
pertaining to uniform charter parties and standardization 
of measures. 

Effect of tramp competition on line organization. — 
The examples given are the most conspicuous effects 
of co-operation among tramp owners, and they serve to 
illustrate the impossibility of efficient tramp organization 
rather than the reverse. How this large and uncontrol- 
lable element of charter vessels reacts upon the line traffic 
is easily understood. It represents a constant menace to, 
and limitation of many great controlling agreements and 
conferences of lines. It should however be understood that, 
on some routes, such as the Canadian Atlantic trade, tramp 
steamers exercise at best only a sporadic influence, which 
affords no protection whatsoever to shippers requiring 



460 OCEAN SHIPPING 

regular shipments in less than cargo lots. Nor does tramp 
competition materially affect the highest types of steam- 
ship service. 

Liner co-operation more easily achieved. — ^There are 
many reasons which render rate control and intensive co- 
operation among liners easier and more practicable than 
like attempts in the charter traffic. The liner represents a 
much larger unit than the tramp vessel; this means that 
the cost of duplication is greater. High-class liners offer 
fast service and passenger accommodations; for this busi- 
ness tramps can not come in and compete. The liner traffic, 
furthermore, shows a greater concentration of ownership; 
the smaller the group of men which controls a certain trade, 
the more easily can this trade be efficiently organized. An- 
other important consideration arises from the fact that the 
tramp which has demoralized freight rates in a given 
trade, thanks to its freedom from route restriction, can 
escape punishment by fleeing the scene of action, while 
the liner "must stay in the water it has troubled and 
suffer the consequences of its deed." 

Costliness of rate wars. — Rate-cutting in the liner 
traffic in most cases leads to costly rate wars in which 
both sides lose heavily. The privacy of the individual 
negotiation which fixes the charter rate, as opposed to 
the publicity ruling among liners, makes rate cutting 
easier for the tramp. But while it is thus evident that 
agreements among liners are more easily made than in 
the charter traffic, it would be wrong to underestimate 
the difficulties confronting those who organize steamship 
line agreements. The limitations resulting from these 
difficulties lie more in the scope of activity of, and the 
degree of control exercised by, individual conferences 
fhan in the number of existing agreements. 



POOLS, AGREEMENTS AND CONFERENCES 461 

But the difficulty does not end when an agreement is 
reached. New lines may endeavor to work their way 
into the ring and fight the existing monopoly. Then the 
same costliness of rate wars which led to the old agree- 
ment helps the newcomers to enter. 

The New York-Caribbean trade affords an interesting 
example of the relation of existing conferences to new 
lines. Until the end of the last century the Atlas Line, 
an English corporation, was the only company offering 
regular service in this trade. Owing to an over-conserva- 
tive management, which was rather old-fashioned in its 
methods, the company made little headway. The Ham- 
burg-American Line, realizing the opportunity presented 
to it, purchased the company, modernized the service, 
and within five years was in a position to show consider- 
able profit. At that time, the Royal Mail Steam Packet 
Company started a competitive service which led to a 
desperate rate war between the two rivals. This ended, 
after two years of struggle, with an agreement between 
the two companies. It was the United Fruit Company 
which, by changing its character from a private line to 
that of a common carrier, threatened to disturb the bal- 
ance of power. Realizing the strength of the newcomer, 
the German and British lines decided to take the United 
Fruit Company into their confidence, preferring to share 
the profits rather than to risk losing them in a hopeless 
rate war.^ 

Purpose and scope of agreements. — The principal pur- 
pose is the regulation of competition through either, (1) 
the fixing or regulation of rates; (2) the apportionment 
of traffic by alloting the ports of sailing, restricting the 
number of sailings, or limiting the volume which certain 

1 See B. OIney Hough. Ocean Traffic and Trade, p. 182. 



462 OCEAN SHIPPING 

lines may carry; (3) the pooling of earnings from all or 
a portion of the traffic ; or (4) meeting the competition of 
non-conference lines. The so-called Alexander Report pub- 
lished by the House Committee on the Merchant Marine 
and Fisheries (February 1914), showed that eighty such 
agreements or understandings, involving practically all 
the regular steamship lines operating on nearly every 
American or foreign trade route, were in existence. It 
would be wrong, however, to assume that, in the case 
of the foreign trade of this country, agreements are more 
numerous or more noticeable than in other parts of the 
world. As a matter of fact, long voyages furnish a better 
field than the transatlantic trade for the establishment of 
rate-controlling combinations. Long voyage trades are 
usually more expensive and require less frequent sailings, 
thereby reducing the number of participants in the serv- 
ice. It is therefore only natural to find shipping trusts, 
rings, and conferences more firmly established, and in 
larger numbers, in trade with the Antipodes than in 
the transatlantic traffic. 

The two charts immediately following show the in- 
terrelation of the most important transatlantic lines for 
(1) passenger, and (2) freight business, as revealed by the 
investigations of the above-mentioned House Committee. 

Of course, the war has changed the personnel, as it were, 
of these conferences but, generally speaking has by no means 
weakened them. On the contrary, ' since the war, the effec- 
tiveness of conference rules has been fortified in every con- 
ceivable way." * 

History of Conferences. — ^The first beginnings of the 
system of North Atlantic steamship conferences reach as far 

1 Rosseter before Senate Committee on Commerce, p. 1986, Hear- 
ings on "Establishment of an American Merchant Marine." 



POOLS, AGREEMENTS AND CONFERENCES 463 

back as 1868. But, generally speaking, the early seventies 
mark the opening of the interesting chapter of world-wide 
steamship line agreements. Its history is coincident with 
the modern development of the liner business. 

As early as 1875, a conference regulated the Calcutta 
trade, and in 1877 the deferred rebate system was intro- 
duced, the weapon which enabled the lines to put the con- 
ferences on a permanent basis. In 1879, the China confer- 
ence was formed, and in 1884, the Australian. In 1886, the 
South African conference came into being and in 1895 the 
West African and the North Brazilian. The River Plate 
and the South Brazilian trades followed in the next year. 
In 1904, the trade with the West Coast of South America 
was covered. Besides these, there are many others, the 
Baltic Pool, the Java-Europe conference, etc. In fact, 
practically the whole globe is but one network of pools 
and conferences extending as far as the line business itself 
reaches. 

Conferences and pools contrasted. — The combinations 
existing between shipping lines may be divided into two 
distinct groups — conferences and pools. Of these, the 
pool is the higher form of development. While a con- 
ference can exist without a pool, a pool cannot exist 
without a conference. A conference may be merely a 
"gentlemen's agreement" calling only for occasional 
meetings of the interested managers, to discuss questions .. 
of administration, forms of bills of lading, methods of 
receiving and delivering cargo, etc. In other cases, how- 
ever, the agreement is based upon a firm and binding 
contract, which is executed in writing, signed and 
sealed, "visiting severe penalties on any of the heavily 
bonded signers who may violate its terms." 

The pool is merely a corrollary of the conference. Pool- 



464 OCEAN SHIPPING 

ing, when applied to steamship lines, involves the pay- 
ment of some part of the freight or passage money into 
a common fund. This fund is later divided among the 
partners according to a scale agreed upon. The pool does 
not necessary kill the desire of. a member line to carry 
as large a portion of a given trade as possible, but it 
usually obviates the scramble for a favorable position, 
which often leads to irregularity as to sailing dates, ports 
of call, etc. Should a pool member not carry his share 
of the joint tonnage without aid, he would have his 
quota of the earnings of the pool reduced. 

Various kinds of pools. — ^The form and administration 
of pools differ materially according to the various kinds 
of trades. In its simplest form, the pool has to do with 
merely one, two or several articles of the cargo carried. 
In its more elaborate forms the pool not only divides 
the money received for the carriage of freight or pas- 
sengers, but also the traffic itself, so that a reasonable 
relation is brought about between pooled earnings and 
service performed. Under such circumstances the pool 
works with considerable fairness, especially when the 
cost of operating the individual steamer is also taken into 
consideration. 

Agreements with freight brokers. — In some cases, the 
agreements may extend into allied territory. Thus "agree- 
» ments" are alleged to exist between the Transatlantic As- 
sociated Freight Conferences and the Steamship Freight 
Brokers Association, both of New York. A great deal of 
dust was stirred up when a Federal Grand Jury, early in 
September 1920, indicted 38 of the leading transatlantic 
steamship companies plying to and from the port of New 
York for alleged restraint and monopoly of trade in viola- 
tion of the Sherman anti-trust law. The indictment also 



POOLS. AGREEMENTS AND CONFERENCES 465 

named four freight brokerage corporations and five indi- 
vidual freight brokers. One count of the indictment alleged 
a conspiracy between the freight brokers and the steam- 
ship lines to keep all the freight brokerage business going 
to and through New York in the hands of the Steamship 
Freight Brokers Association. We quote the following from 
the New York Sun: 

"The indictment charges and the petition for the dissolu- 
tion of the Steamship Freight Brokers Association and of 
the Trans-Atlantic Associated Freight Conferences, sets 
forth that the defendants on January 1, 1917, conspired and 
have since continually violated the Sherman anti-trust law 
by restraining interstate trade and foreign commerce in 
grain, oil, lumber, coal and other commodities and manu- 
factured articles produced and made throughout the United 
States and in foreign countries. 

Percentage of Freight Handled. — "It is alleged further 
that upward of 50 per cent of such foreign trade and 
commerce passes in the due course of business through the 
port of New York, and that 30 per cent, of the 50 per cent, 
is handled by freight brokers and forwarders, and of that 
30 per cent, upward of 80 per cent, is handled by about 
seventy-five of the freight brokers or forwarders who are 
members of the Steamship Freight Brokers Association and 
is transported by the steamship companies named as de- 
fendents in the proceedings. 

"The indictment avers that the steamship companies in- 
cluded in the Trans-Atlantic Associated Freight Confer- 
ences and the brokers and forwarders included in the 
Steamship Freight Brokers Association entered into agree- 
ments not to permit any freight broker or forwarder to be- 
come a member of the association "unless he would swear 
to and would observe, adhere to, abide by and be subject 



466 OCEAN SHIPPING 

to the constitution and by laws of the Steamship Freight 
Brokers Association." and would agree that the freight 
rates offered or quoted by the authorized agents of the 
steamship companies should be observed, adhered to and 
maintained. 

"It is further charged that illegal agreements entered into 
included compacts to discriminate and discriminating 
against freight brokers and forwarders by refusing to pay 
any 'brokerage fee,' so called, to any person not a member 
of the Steamship Freight Brokers Association; agreeing to 
control and dominate, through the organization and rules 
of the New York Produce exchange, the members of said 
Steamship Freight Brokers Association by requiring all 
applicants for membership therein to become members of 
the New York Produce Exchange. 

"Agreeing to blacklist and blacklisting all freight brokers 
and forwarders who were not acceptable to or approved by 
defendant steamship cbmpanies and the board of directors 
of said Steamship Freight Brokers Association; agreeing 
to limit the membership in the said Steamship Freight 
Brokers Association by requiring all applicants for mem- 
bership in said association to become members of said 
Produce Exchange, the membership of which is now, and 
for a long time past has been, closed ; agreeing that all con- 
tracts for the shipment of said freight be made subject to 
the rules of the New York Produce Exchange; agreeing 
that no member of the said Steamship Freight Brokers 
Association shall divide any 'brokerage fee,' so called, with 
any person other than fellow members of the said Steam- 
ship Freight Brokers Association ; agreeing that no member 
of the said Steamship Freight Brokers Association shall be 
interested in any subsidiary company; agreeing that no 
person shall be a member of said Steamship Freight Broken 



POOLS, AGREEMENTS AND CONFERENCES 467 

Association unless he is engaged solely in the steamship 
freight brokerage or forwarding business." 

In the equity suit is sought not only dissolution of the 
steamship Freight Brokers Association and of the Trans- 
atlantic Associated Freight Conferences, but the court is 
petitioned to stop by injunction all the illegal and objec- 
tionable practices enumerated and complained of. Attached 
to the bill of indictment and to the dissolution petition as an 
exhibit, is a copy of the constitution and by-laws of the 
Steamship Freight Brokers Association, which substan- 
tiates the several "agreements" enumerated. 

Less than two months later, the District Court gave com- 
plete victory to the defendants finding the Government 
charge unfounded. 

Agreements between Steamship companies and rail- 
roads. — In this connection, agreements made between 
steamship companies and railroads should be discussed. 
The famous Report on steamship Agreements and affiliations 
in the American Foreign and Domestic Trade prepared by 
Prof. S. S. Huebner in 1914, devotes an entire chapter 
to this phase. At that time it was found that New York, 
New Orleans and Galveston were apparently "open ports," 
meaning thereby, ports where, as far as steamship lines 
and railroads were concerned, no special agreements existed. 
But nearly all other Atlantic, Gulf and Pacific Ports regis- 
tered 'the existence of such agreements. Some of these 
agreements were only preferential, others exclusive in na- 
ture. But the Report claims that many of the so-called 
preferential agreements were actually exclusive, having been 
cloaked in a thin mantle of disguise so as to comply with 
certain requirements of an Interstate Commerce Commis- 
sion decision of 1912. 

V; 



468 OCEAN SHIPPING 

Advantages of conferences. — The advantages and dis- 
advantages of steamship conferences, as seen from the 
point of view of both the shipowner and the shipper, 
have been carefully analyzed by the expert adviser of the 
United States House Committee on the Merchant Marine 
and Fisheries, Prof. S. S. Huebner. We shall give here 
merely a short summary of Professor Huebner's statement. 

Agreements are said to have resulted in improving the 
service rendered by the steamship lines. These improve- 
ments consist mainly in greater regularity and increased 
number of sailings and in the instalment of faster and 
safer vessels. Greater regularity brings several .ad- 
vantages to the shipper; he needs less stock, does not 
have to engage cargo space long in advance and can 
enter forward contracts for the delivery of his goods at 
a definite date. The greater speed and safety of the 
vessels bring lower insurance rates and reduce the loss 
of interest on the cargo while in transit. 

Stability of rates. — Stability of rates over long periods 
of time is the next favorable result of steamship con- 
ferences. The speculative risk which exists under the 
system of open competition is eliminated. It enables 
the shipper and merchant to calculate to a nicety this 
element of cost. Three factors assure the shipper reason- 
able rates: (a) lines cannot afford to charge rates detri- 
mental to the development of the traffic ; (b) competition 
of lines serving the European merchant between the 
same ports to which American shippers trade, serves as 
a constant check on rates from America; (c) tramp com- 
petition holds down liner rates. 

Less discrimination. — It is furthermore claimed that 
the conference establishes uniform rate charges, the small 



POOLS, AGREEMENTS AND CONFERENCES 469 

shipper being treated in the same way as the big one. 
Under the system of open competition the powerful 
shipper could play one line against the other and thereby 
obtain preferential rates. The conference, on the other 
hand, has no special interest in showing favors to big 
shippers, especially when earnings are pooled irrespective 
of the amount of business done by each line. 

The rate wars common under open competition often 
result in the survival of the strongest and the elimina- 
tion of the weak lines ; but agreements, particularly pools, 
tend to compensate weaker members for their inability 
to obtain a large portion of the more remunerative trade. 

Sounder rate policy. — While the standard of service 
rendered by the conference lines has improved, certain 
reductions in the cost of the service, made possible by 
the conference, are said to result in an ultimate reduc- 
tion of freight rates. -Wasteful competition is elimi- 
nated, and the aggregate cost of the service rendered by 
all the lines is accordingly reduced. Furthermore, the 
cost of service can be more economically distributed so 
as to develop the trade. Rates may be reduced on cer- 
tain articles, compensation being found in increasing the 
rate on other items. Lines can view the trade "not only 
as it is, but also as it may become." Ports can be de- 
veloped which otherwise would be neglected. 

Judge Alexander, the former Secretary of Commerce, 
who presided over the Shipping Investigation, summed up 
the situation in a recent report with the words: 

"Steamship line representatives, as well as the patrons 
of the lines, were almost a unit in emphasizing to the 
committee the importance and necessity of the afore- 
mentioned advantages of agreements and conferences." 



470 OCEAN SHIPPING 

Need of effective control. — But the report also added: 
"While admitting their many advantages, the committee 
is not disposed to recognize steamship agreements and 
conferences unless the same are brought under some 
form of effective government supervision. To permit 
such agreements without government supervision w^ould 
mean giving the parties thereto unrestricted right of 
action. Abuses exist, and the numerous complaints re- 
ceived by the committee show that they must be recog- 
nized. In nearly all the trade routes to and from the 
United States, the conference lines have virtually a 
monopoly of the line service." 

"The committee believes that the disadvantages and 
abuses connected with steamship agreements and con- 
ferences as now conducted are inherent, and can only 
be eliminated by effective government control; and it is 
such control that the committee recommends as the 
means of preserving to American exporters and importers 
the advantages enumerated, and of preventing the abuses 
complained of." In other words, it is proposed to apply to 
combinations in the ocean carrying trade similar principles 
as we find governing the legislative treatment of the railroads. 
Combination is permitted, but subject to control. 

Disadvantages of conferences: monopolistic tendency. 
— Without such control it is doubtful whether the advan- 
tages just stated outweigh the following disadvantages. 

In the first place, the monopolistic nature of the 
steamship-line combinations is attacked. It is said that 
all combinations of private enterprises containing the 
germ of monopoly are apt to abuse their power to the 
detriment of the public, the primary aim of the confer- 
ences being to prevent the establishment of other lines. 



POOLS, AGREEMENTS AND CONFERENCES 471 

in a given trade. In so far as "fighting ships"' are used 
for the accomplishment of this aim, the shippers' conten- 
tion finds support in the courts. These fighting ships 
are sent by the combination to take away the business 
of an uncontrollable competitor. They dock next to the 
competitor's ship and take freight at a lower rate than 
he could afford to grant. When the United States, just 
before the outbreak of the War, brought suit against the 
Hamburg-American Line and other foreign steamship lines, 
attempting to "break up an alleged combination of Euro- 
pean ship-owning lines," the court refused to grant the 
principal relief asked for by the Government, but granted 
a relief against fighting ships. 

The fear is expressed that although the monopoly of 
the lines may be limited at present, the combinations will 
become more powerful in the future and will gradually 
gain control over their specific area. 

Shippers further object to the secrecy of most steam- 
ship agreements, especially to the refusal of the lines to 
publish their rates and tariffs. 

In some cases it is claimed the lines have arbitrarily 
increased rates without giving the shipper due notice in 
advance. Shippers also argue that not all lines adhere 
to the principle of treating all shippers alike. 

Deferred rebates. — Strong opposition is voiced against 
the deferred rebate system. Under this system, the line 
agrees to refund to the "loyal shipper," i.e., the shipper 

1 Defined as follows in United States Shipping Act, 1916, Section 
14: 

"The term 'fighting ship' in this Act means a vessel used in a par- 
ticular trade by a carrier or group of carriers for the purpose of 
excluding, preventing, or reducing competition by driving another 
carrier out of said trade." 



472' OCEAN SHIPPING 

who patronizes the line exclusively with all his ship- 
ments in a given direction, a certain portion of the 
freight charges, usually five to ten per cent. This rebate 
is paid after periods of considerable length, in some cases 
as long as twelve months, and is therefore called a "de- 
ferred rebate." ^ 

Its general significance appears from the following 
finding of the British Royal Commission on Shipping 
Rings : 

"That a conference making use of the system of de- 
ferred rebates possesses so far as the shipper of general 
merchandise is concerned, a limited monopoly, and that 
this monopoly is dependent upon the system of deferred 
rebates or some tie equally effective." 

America forbids "deferred rebates" and "fighting 
ships." — Courts and Congress of this country have 
stamped this system of deferred rebates as an unlawful 
practice. The United States Supreme Court in its de- 
cision against the Hamburg-American Line and other 
North Atlantic steamship companies, handed down a 
decision in October, 1915, endorsing the recommenda- 
tion of the Alexander House Committee referred to 
above, and declared against deferred rebates and fight- 

1 Deferred rebate is defined in the Shipping Act, 1916, Section 14, 
as follows : 

"The term 'deferred rebate' in this Act means a return of any 
portion of the freight money by a carrier to any shipper as a con- 
sideration for the giving of all or any portion of his shipments to 
the same or any other carrier, or for any other purpose, the pay- 
ment of which is deferred beyond the completion of the service 
for which it is paid, and is made only if, during both the period for 
which computed and the period of deferment, the shipper has 
complied with the terms of the rebate agreement or arrangement." 



POOLS, AGREEMENTS AND CONFERENCES A73 

ing ships. Further, the Shipping Act of 1916 contains 
the following prohibition: 

Sec. 14. That no common carrier by water shall di- 
rectly or indirectly — 

"First. Pay or allow, or enter into any combination, 
agreement or understanding, express or implied, to pay 
or allow, a deferred rebate to any shipper. 

"Second, Use a fighting ship either separately or in 
conjunction with any other carrier, through agreement 
or otherwise." 

No such law exists on the statute books of England, 
our greatest rival. The Royal Commission on Shipping 
Rings (1909) expressly went on record as "not in favor 
of drastic remedies such as the abolition of the deferred 
rebafe system." The Cunard Line, unhampered by 
legal restrictions, not long ago published in all the lead- 
ing trade papers of this country, an offer of rebate to all 
loyal shippers. The Nautical Gazette, for March, 13, 1920, 
contained the following announcement: 

REBATE GRANTING LINES. Messrs. Larrinaga & Co., Ltd., 
of Liverpool, inform shippers that they will grant a rebate of 10 per 
cent, primage (when primage is charged) on all shipments (except 
such as may have been made under special contract) shipped by 
their steamers or by steamers loaded by them from the United King- 
dom or the Continent to Havana, Matanzas, Santiago de Cuba, Cien- 
fuegos, and other ports in Cuba. The rebates are, however, subject 
to the following conditions, and may be discontinued whenever notice 
thereof is given. They will be computed on June 30, 1920, and every 
six months thereafter, and be payable six months afterwards, but 
only to those shippers who have, up to such due date, confined their 
shipments from the United Kingdom, Germany, Norway, Sweden, 
Denmark, Holland, Belgium, France and Spain, to steamers loaded 
by the Royal Mail Steam Packet Company, the Compagnie Generale 
Transatlantique, Compaiiia Transatlantica de Barcelona, Cuban Line 
(Ernest Bigland & Co., Ltd.), Larrinaga & Co., Ltd., John Glynn & 



474 OCEAN SHIPPING 

Son, Ltd., G. H. Fletcher & Co., and W. L. Nickles, Son & Co., and 

have been in no way interested, directly or indirectly, either as 
principals or shippers, in shipments by any other vessel, either pro- 
ceeding herself, or taking cargo by transhipment, to the above-men- 
tioned ports. Shipments by the Ward Line via New York, and by 
steamers provided by Messrs. Fearnley & Wilhelmsen from Scandi- 
navian ports, and by steamers of the Koninklijke West-Indische 
Maildienst, of Amsterdam, from Holland to the south ports of 
Cuba, will not invalidate the claim for rebate." 

Difficulties of American shippers. — This situation puts 
the American shipper as well as carrier into a very un- 
fortunate position. It appears that for a while no American 
ship was approved by the British conference, as under 
American laws deferred rebate cannot be paid and as the 
deferred rebate, in the opinion of many, is the corner-stone 
of the conference system. "Therefore, when our ships go 
to the Orient and a shipper has the temerity to ship cargo 
by our vessel, he will receive a notice from the British India 
or the P. & O., calling his attention to the fact that they are 
aware of his shipment and reminding him that it voids their 
obligation to pay him the deferred rebate. With suc'n a 
large sum dependent upon it, it takes a considerable 
stress of circumstances for shippers to patronize an 
American ship at all." (Mr. Rosseter before Senate Com- 
mittee on Commerce.) 

This situation is further aggravated by the fact that 
the shippers who dare to face the anger of the conference 
lines are left without any service at all in the ports of 
the world where only foreign conference lines but no 
American lines exist. This is brought out by the follow- 
ing discourse which occurred during the hearings before 
the Senate Committee on Commerce relative to the "Estab- 
lishment of an American Merchant Marine." (P. 1987 of 
the Report.) 



POOLS, AGREEMENTS AND CONFERENCES 475 

"Mr. RossETER. The next thing — and it has a bearing on the point I 
referred to some time back — is the necessity of a real world-wide sys- 
tem. I have also seen notes written by conference agents calling at- 
tention to the fact that it is known they are patronizing ships not in 
the conference, and reminding the shipper that the next time he ap- 
plies for an allotment of space in some service where American ships 
are not operating he can whistle for it. In fact, I find it quite natural 
that they give the preference to the shipper who is supporting their 
lines. Those who have seen fit to support an opposition line are 
plainly given to understand it will be to their prejudice. Thus it is 
our responsibility to provide world-wide service to protect those who 
would patronize our ships. 

"Senator Ransdell. How are you going to overcome that? 

"The Chairman. I have been told this has occurred : If the Brit- 
ish learn of a shipper that is proposing to ship something to the 
United States in an American ship they tell him: 'If you do that you 
can look to them for your entire service. We will not allow you to 
ship on our ships.' 

"Mr. RossETER. That is true." 

Mr. Rosseter's conclusion is that the United States 
has the choice of either providing world-wide service for 
its shippers and waging relentless war against the foreign 
conference lines, or else of legalizing the deferred rebate. 

Congress endeavors to aid. — Congress seems to be 
aware of the handicap which the discrepancies of the 
law means to the American ship operators and shippers. 
The Shipping Board tried to meet the situation by- 
making the original freight charges so low as to offset 
the effect of a differential. But such practices do not 
always bring the desired results and always mean a 
sacrifice. It is therefore not surprising that both the 
House and the Senate are planning war against the de- 
ferred rebate. Representative George W. Edmond of 
Pennsylvania, early in 1920, introduced a bill in the House 
which proposes to deny entry into American ports to 



476 OCEAN SHIPPING 

foreign vessels granting rebates to their shippers. Sen- 
ator W. Jones, Chairman of the Senate Committee on 
Commerce wanted to incorporate the same idea into the 
Merchant Marine Act, 1920.^ But so far, it seems that our 
bark is worse than our bite. For when we come down 
from the pedestal of legislative superiority and face the cold 
facts, we seem to be quite kindly disposed' toward these 
rebate-granting conferences. 

America's attitude toward existing conferences. — For 
the present, the Shipping Board directs the policy of much 
of our shipping. Its attitude, so far, has been co-operation 
rather than "fight to the finish," as appears from the 
following clipping from the Annalist of May 24, 1920. 
(p. 695.) 

"The American merchant marine, in its effort to win a place on 
the seas as a world factor, will co-operate with the foreign lines, 
rather than engage in unrestricted competition. The Shipping Board, 
which will own and direct more than 2,000 oceangoing vessels when 
the building program is completed, has decided to enter into a work- 
ing agreement with the foreign tteamship lines, whereby there will 
be no throat-cutting competition. It has given its sanction to the 
plan of permitting its managing agents to participate in the steam- 
ship conferences which fix the freight rates that all lines must 
observe. Instead of bucking the other interests in th; determina- 
tion to keep the American flag merchant ships in the world trades, the 
Shipping Board has indicated its willingness to be governed by a 
common policy. 

"The Shipping Board is technically not a member of any confer- 
ence. While it does not enter into these pacts, the Government board 
sanctions this action on the part of its managing agents, the term by 
which a company to which the Shipping Board has allocated ships for 
operation is now designated. It is not singular that the foreign com- 
panies should desire to co-operate with the Government board in the 
matter of fixing ocean rates, however. ; 

1 See Chapter XXX. 



POOLS. AGREEMENTS AND CONFERENCES 477 

"Because of the potential resources of the board the foreign lines 
were gratified to participate in a co-operative agreement. While the 
conference agreements are the latest developments, for more than 
six months in some routes there has been a close understanding. 
The foreign lines, with sailings from New York to the United King- 
dom, held conferences during the morning of a specified date every 
month. The result of their meetings was forwarded to a similar 
conference, held in the afternoons of the same days by the Shipping 
Board managing agents. Invariably the rates at which cargoes were 
booked remained the same on all lines. 

"How long this friendship will last, remains to be seen." 

In the latter part of 1920, Mr. F. B. Mackay, Vice-presi- 
dent of the Barber Steamship Lines, spent several weeks 
in Europe in order to assist in the negotiations then going 
on with the principal British and continental Steamship 
conferences which were to bring Shipping Board tonnage 
into these conferences on equal terms with the other con- 
stituent lines. Upon his return, Mr. Mackay made the fol- 
lowing statement : ^ 

"Arrangements were made, for shipping board vessels 
to get into some of the foreign conferences. Of course, our 
boats will have to take pot luck with the other lines and 
submit to the conditions under which the conferences are 
run. In meeting the owners composing the conferences I 
found they had no objection worth mentioning to shipping 
board boats coming into the agreements provided the ship- 
ping board and the operators were willing to conform to 
the rules and regulations observed by the other members. 

"The principal difficulty was the rebate question. It came 
up in one instance and it was shown conclusively that the 
trade could not be held and run properly without this old- 
fashioned custom. It was then agreed by the board at 

» Nautical Gasette, December 4, 1920. 



478 OCEAN SHIPPING 

Washington that American vessels could grant rebates in 
trades between foreign countries. 

"Taken all 'round Capt. Frank E. Ferris of the shipping 
board and myself were well received. The foreign owners, 
taken as a body, will be glad to come to some amicable 
arrangement under which a large number of the shipping 
board boats will be taken care of whenever they are ready 
to come into the conferences. 

Our Efforts Appreciated. — "I found in England a gen- 
eral willingness to appreciate the fact that our steel ships 
were built as a war effort for the purpose of feeding Europe. 
Of course, it was felt that the shipping board vessels, after 
having come into the conferences, would have to remain 
in and take the good times with the bad. In other words 
it would be expected that the shipping board would not lay 
off its vessels when they ceased to be profitable." 

Regulated combinations versus wild competition. — ^To 

sum up this chapter we might conclude that such state- 
ments as that of Mr. Rufus Hardy before the Committee 
on the Merchant Marine and Fisheries, that "the day 
of competition on the ocean is gone, that combination has 
taken its place," should be accepted with reservations. 
It was shown that many agreements do exist among 
former rivals, and that in rare instances competition has 
actually been replaced by combination. But it is also 
true that competition in rate making has been replaced 
by competition in service, and that as yet no combina- 
tion has been found strong enough to overcome the force 
of competition innate in the nature of shipping. The 
slogan is not "combination versus competition," but 
"regulation versus wild competition." 



POOLS, AGREEMENTS AND CONFERENCES 479 

REFERENCES 

The Annals of the American Academy of Political and Social 
Science, Vol. LV. Government Regulation of Water Transpor- 
tation. Sept., 1914. Various articles. 

Hough, B. O. Ocean Traffic and Trade. Chap. VII. (1915.) 

Johnson and Huebner. Principles of Ocean Transportation. Chap. 
XIX. (1919). 

Smith, J. R. The Ocean Carrier. Part II. Chaps. II-V. (1908). 

United Kingdom. Royal Commission. Report on Skipping Rings. 
(1909). 

United States. House Committee on the Merchant Marine and 
Fisheries. Proceedings in the Investigation of Shipping Combina- 
tions (Vol. IV.) Report on Steamship agreements and affiliations 
in the American Foreign and Domestic Commerce, by S. S. 
Huebner, (4 Vols., House Doc. No. 805, 63 Cong. 2 Sess., 1914.) 



PART VIII 
RATES AND FINANCES 



481 



CHAPTER XXV 
THEORY OF RATE-MAKING 
Theory and practice of rate-making contrasted. — A 
theoretical analysis of rate-making is concerned with the 
influences which affect the general level of freight rates and 
passenger fares, rather than with the detailed considerations 
which determine the fixing of the rate charged for a specific 
cargo to be carried in a given vessel over a particular route. 
Having in mind this distinction between theoretical and 
practical rate-making, we may say that in theory rates move 
between two points, the minimum rate, which is determined 
by the cost of transportation, including direct operating ex- 
penses as well as overhead and fixed charges, and the theo- 
retical maximum, which is set by "what the traffic will bear," 
or, putting it differently, is reached at the point when too 
heavy charges discourage transportation to such an extent 
that the net profit suffers. Between these two points the 
forces of supply and demand determine what charges are 
to prevail in a given market at a given season for different 
kinds of ships and different services rendered. To be sure, 
at times charges may fall below the theoretical minimum, 
as, for instance, in the case of rate wars where "fighting 
ships" are being employed, or when a ship offers "distress 
space," or, in turn, they may rise above the theoretical 
maximum because of imperfect calculations on the part of 
the traffic manager responsible for freight rates. Also the 
working of the laws of supply and demand may be inter- 
fered with, and are frequently interfered with through 
rings, pools, agreements, etc., as we have seen in previous 
chapters. 

483 



484 OCEAN SHIPPING 

Cost analysis of steamship operation. — We take up 
the matter of cost first. To ascertain the cost of steamship 
service, expenses may be divided into three classes, on the 
basis of the relative exactness with which these expenses 
vary as the traffic varies. The concept of traffic involves 
both the quantity of cargo and the length of the haul. Ex- 
penses which vary most closely with the intensity of the 
traffic may, therefore, be subdivided into those whose varia- 
tions are caused by changes in the quantity of cargo carried 
and those due to differences in the haul. On this basis 
expenses may be divided as follows:* 

1. Expenses depending most nearly upon the amount of 

operation performed. 

(a) Operating expenses varying with the length of 

the haul, fuel, wear and strain on machinery 
and vessel (so far as due to use), wages of 
seamen (to a certain extent). 

(b) Operating expenses varying with the amount of 

cargo; cost of loading, unloading and trans- 
shipment. 

(c) Operating expenses varying with traffic intensity 

in general, pilotage, wharf charges, towage, hull 
insurance, commissions to ship brokers, rebates, 
etc. 

2. General expenses, not varying with the volume of 

traffic but incurred only as long as operation pro- 
ceeds, such as salaries to ship's officers, expenses 
for general oversight, freight soliciting, cleaning 
of hulls, a part of general repairs, etc. 

' Adapted from H. G. Brown, Principles of Commerce. Part III 
?p. Sff. 



THEORY OF RATE-MAKING 485 

3. Fixed charges, that is, charges which must be met 
regardless of operation, such as taxes, interest on 
borrowed capital, depreciation (partly), etc. 

Vessel types and cost. — The relative significance 
of these various expense items is not the same for 
all ships, but depends upon a large number of factors. In 
the first place, it varies with the type of vessel, though not 
as much as one might assume. In the case of a sailing ship 
the fuel item, of course, disappears entirely, and its operat- 
ing expenses in general are very low. But sailing ships 
represent also less sunk capital. If we compare the expen- 
diture incurred in operating a sailing ship with that of an 
express steamer we find that the sunk cost per unit — say, 
per gross registered ton — is a multiple in the case of the 
express steamer of what it is in the case of the sailing ship. 
But so are operating expenses per ton mile. The question 
is simply which of the two items increases more rapidly.'' 

Effect of age. — Secondly, the question of age enters 
into the calculation of cost. An old ship whose original cost 
has been written off will show a low percentage of fixed 
charges. In this connection it is of interest to point out how 
the different nationalities stand in this respect. The United 
States probably has the youngest merchant marine, over 85 
per cent of her oceangoing ships having been built since 
the outbreak of the war. England is probably second, for 
not only are shipbuilders busy in replacing British submarine 

1 According to Captain Paul Foky, Director of the Division of 
Operations of the Shipping Board, the operating expenses of the 
Board's vessel fleet can be apportioned as follows : Fuel cost, 43 per 
cent; repairs, 30 per cent; w3ges and overtime, 15 per cent; sub- 
sistence, 5 per cent ; stores 7 per cent. {Nautical Gazette, February 
12, 1921, p. 219.) 



486 



OCEAN SHIPPING 



losses, but it has always been a feature of British maritime 
policy to dispose of her oldest ships to rival nations, particu- 
larly the Scandinavian. The following chart proves our 
statement : 



TONNAGE OF LEADING MARITIME COUNTRIES FOR 12 
MONTHS ENDING JUNE 30TH, 1914 



Tonnage 
Added 



Proportion 
of New 
Vessels 



Tonnage 
Deducted 



Proportion 

Vessels lost 

Broken 

Up, Etc. 



United Kingdom 

Germany 

France 

Italy 

Norway 

Sweden 



Tons Net 
955,000 
387,000 
137,000 
137,000 
152,000 
66,000 



Per Cent 
97 
85 
61 
12 
59 
62 



Tons Net 
621,000 
86,000 
38,000 
32,000 
37,000 
17,000 



Per Cent 
24 
33 
58 
66 
49 
53 



The War has changed this situation considerably. On 
the one hand, England could not afford to sell much tonnage 
old or new, to anyone; on the other, the merchant marine 
of the United States contains a larger proportion of new 
vessels than at any previous time. This situation is causing 
considerable worry on the other side. 

It is stated that a large proportion of the Japanese mer- 
chant marine consists of very old ships, some of which are 
barely seaworthy. Of course, what counts in the cost cal- 
culation is not so much the actual age of the ship as the 
length of time expired since the present owner acquired the 
ship and the extent to which he has written off the pur- 
chasing price. But in normal times the purchasing price in 
turn reflects the age of the ship. 

Corporate financing and cost. — Another factor which 



THEORY OF RATE-MAKING 487 

influences the relative significance of the three groups of 
expenses is the method of capitalization. The International 
Mercantile Marine Company, with its heavy bonded in- 
debtedness and a large amount of cumulative preferred stock 
outstanding, is an example of the extent to which the man- 
ner of capitalization can affect fixed or quasi-fixed charges, 
and thus the entire relation of the different expenses to each 
other. 

Furthermore, the nationality of a ship has an effect upon 
the distribution of expense, owing to differences in the wage 
scale, in subsidies, in various laws or national customs regu- 
lating the practice of depreciation charges, etc. Again, the 
voyage to be undertaken has a bearing upon expense, since 
terminal charges, fuel expenses and insurance rates differ 
considerably in different parts of the world. 

Other factors influencing cost. — Other factors entering 
into the equation are the speed required or desired, the fuel 
available, the technical and nautical peculiarities of a given 
ship, canal dues, and finally the climatic, geographical, com- 
mercial and political conditions prevailing on a given trade 
route. 

All these factors have been considered in the following 
analysis of costs prepared by the Division of Planning and 
Statistics of the United States Shipping Board. We have 
extracted this particular analysis from a valuable study en- 
titled The Relative Desirability of Ships Operating on Four 
Trade Routes : 



488 



OCEAN SHIPPING 



ANALYSIS OF COSTS OF STEAMSHIP OPERATING 

BETWEEN NORFOLK AND VALPARAISO 

(8,900 KNOTS) 



CAHOO 


Bun OT Vaioi 


Hl(b. 


Uw. 


Outbouod, cool 

Inbound, Ditmt?^ 


tfl.20 
80.00 


15.00 
60.00 



KIND or FUEI. „ 



5.S50 D. W. T. STEEL SHIP. 



FIXED CHARGES. 



tiVt a pvt, Norfolk ud Vilpu 



L'oil pu D. W. T. 

KapalnBDd nulDtoonnce 

SubiblenM per nun. duf. .. 



Basis oi Valvk 



Inloresl on tDvcximont... 



RatearinsuroDco: 
Hnlltnd m 
CufD canloil, pai trip... 



SHIP CHARACTERISTICS. 



IJtuittb over oil 3W 0" 

MoldoU Lrcaitd*..^ 49- 

Uoidod dopib ___„...... 3S- 

Load dmlt . V ' 



laillcated bonepoirer 

Daleoed tpoM), knoU_... 
Nai opcraUi)( da;i... 



OASIS OF COSTS AND BXFBNSBS 

<uiunilni full caigoM}, 



OmMn Bad crair. .. 



fiutaia tanca, onlMn ud entr 



4B,7gQ 
6,780 



Pilota"*, harbor cbargn, (te... 



Total. EXCLUaivKa 



Total Annual EiiMUdltunu. 
P«i cargo-ton knot. 



Par carEO-tDo knot 



Pm carGO-lao knot. 



oa.sa 



•FFBCI OF TABT FCIX CABGO, INBOOpfD. 

K^DDi can! emptr; 



Par Gart[o-Uii: Imol... 



to par cant ampt*. 

Total anniiaroxponiDi 
Pof cori.'o-ioi: kDot... 



Par earso-taD leaot „ 

jVfect of post delat. 

tiavi aiMlUonal In port; 

Total uimiul s^rMnioi 

Par ODreo-toD kaot ....... 



I dan iHldllloiUi In pork 
To'al ann JO] BHpanMt... 
Par earBO-ten knal....~. 



4ti,Ka , 9 n 
«-..' oou 



187,(03 : 

3S,im 



804,144 I G,4a 
] .OOMI 



W,B7S 
4S,00C 

e,780 



.1 .00008 



W.Sii ■ B O: 
j u 

441,037 I 13.0. 



100.0 !IW,033 



THEORY OF RATE-MAKING 489 

How to calculate the profitableness of a service.— We 
stated before that the cost incurred in rendering the 
service of transportation determines the minimum rate 
which must be charged. The next question is: What 
quantity must be carried or what volume of traffic is needed 
to make a shipping enterprise pay? In order to satisfactorily 
answer this question we divide the vessel into "capacity 
units." We choose the deadweight ton (2,240 pounds, or 40 
cubic feet) knot as our "capacity unit." When filled with 
cargo moved for the purpose of transportation this "capacity 
unit" becomes a "production unit." This unit is the cargo- 
ton knot. The question is now reduced to a simpler form, 
namely : how many "capacity imits" must become "produc- 
tion units" to repay expenses, or assure minimum profitable- 
ness. But profitableness depends on the ratio of receipts to 
expenditures. So the next step is to reduce all receipts and 
expenditures (per annum or per round trip) to these units. 
By consulting the Shipping Board cost analysis given above, 
we find that annual expenditures are given "per cargo-ton 
knot" and are found to vary in the case of full cargoes each 
way from $.00052 to $.00089. The expenditures per cargo- 
ton knot increase as the amount of cargo carried decreases, 
or, to use the terms introduced before, as the number of 
"capacity units" which become "production units" de- 
creases. In our cost analysis the highest point is reached 
at $.00159. The rate of increase of expenditures per cargo- 
ton knot depends upon the ratio of fixed charges plus gen- 
eral expenses to total expenditures. The greater these 
charges in proportion to the total .expenditure, the more 
rapid is the increase of expenditures per cargo-ton mile with 
decreasing supply of freight offering. 

An attempt has been made to express, by means of a 



490 OCEAN SHIPPING 

mathematical formula,' the relation in which these various 
factors stand to each other. The formula follows : 

Let C (Cost) equal fixed charges plus general expenses per 

nautical mile; 
Let c (cost) equal operating expenses incurred in operating one 

"capacity unit" (D. W. ton) ; 
Let R (Receipts) equal receipts per "production unit" (cargo 

ton); 
Let X equal the number of "capacity units" which 

must be turned into "production units" in 

order to make the enterprise pay. 

Then^+c=R; or x= ^ 
X R-c 

In other words, the lowest number of "capacity units" 
which must become "production units" in order to make a 
shipping enterprise pay is equal to the amount paid in the 
form of fixed charges and general expenses per nautical 
mile divided by the receipts per "production unit" minus the 
operating expenses incurred in operating one "capacity unit." 
X indicates the "point of minimum profit from operation." 

The question of "laying up." — The next question is: 
What quantity must be carried to avoid "laying up ?" A ship 
while idle is a liability; apart from the cost of upkeep, an 
idle ship means loss of interest on the invested capital. 
Depreciation also goes on. Therefore, it is good business 
to keep a vessel going not only up to the point where the 
owner breaks even, that is to say, when receipts defray 
expenses and leave the owner a reasonable return on the 
invested capital, but even beyond that point. The ship 
should be kept going as long as the loss during operation is 
less than the loss suffered from "laying up." The point, 

1 See P. Lenz, op cit. p. 4, 



THEORY OF RATE-MAKING 491 

reached just before the ship must be "laid up," may be 
called the "point of maximum loss from operation." 

Traffic intensity. — The reverse would be the "point 
of maximum profit from operation." This is naturally 
reached when the vessel is kept going continuously, fully 
loaded with best paying freight in both directions. We 
may distinguish a relative and an absolute maximum. The 
former refers to the largest possible gain which can be made 
with a given investment (one ship, two ships, a small ship, 
a large ship, etc.), while the latter assumes that the tonnage 
supply on a given route has been expanded or the investment 
been increased, so as to provide sufficient carrying capacity 
for all the cargo offering. Or to put it differently : the rela- 
tive maximum is limited by the vessel tonnage put on a 
certain route, while absolute maximum profit is limited only 
by the amount and nature of the cargo offering. In a way 
even that is not an absolute quantity, as it changes with the 
cost of transportation, the rate charged, conditions in com- 
petitive countries, etc. 

The significance of the load index. — In our previous 
calculations we have considered the profitableness of com- 
plete round voyages and of all the voyages performed dur- 
ing one year, without separately considering the two distinct 
services which make up each round trip — the outward trip 
and the home voyage. For the financial result of a year's 
performance it may be of little consequence whether a ship 
goes half filled both ways, or fully loaded one way and in 
ballast the other (assuming that the full cargo one way nets 
the same revenue as the two half cargoes). But for the 
steamship man whose natural endeavor is to secure as much 
cargo as possible for both the outward and the homeward 
trip, a careful analysis of the cargo offering in either direc- 
tion is of the greatest importance. In other words, we face 



492 OCEAN SHIPPING 

the problem : What effect does the load index ( See Oiapter 
II) have upon rate-making? We have said that a vessel 
will operate at maximum efficiency and at the lowest cost 
per cargo-ton knot if it can secure a full cargo each way on 
every trip. The load index may fall short of this ideal in 
two general ways ; there may be enough freight in one direc- 
tion to furnish full loads, but not enough in the opposite 
direction to furnish more than partial loads, or the freight 
may be offered so irregularly in either or both directions 
that the loads vary throughout the season. 

Consequently a ship can afford to accept lower rates for 
carrying goods to a place where, and at a time when, a 
return cargo may be secured than to a place which offers 
no return shipment. A few examples may illustrate this. 

"The DOrts on the Pacific Coast are desirable destinations for 
sailing vessels expecting to reach that coast in the fall and early- 
winter, for there at that time a supply of wheat and barley is ready 
for shipment to Europe. The same applies to other ports which are 
outlets for surplus crops. 

"Early in April, 1907, a steamer was chartered to carry a cargo of 
general, merchandise from New York to Australia and New Zealand, 
the rate named being 31 shillings per ton. About two weeks later 
another vessel was chartered to make a similar voyage for 28 shillings 
6 pence per ton. This reduction was due partly to the fact that the 
second vessel was expected to reach its destination when the pros- 
pects for securing a return cargo were more favorable than for the 
other vessel. The first ship was to leave New York in April or May ; 
the second was chartered for late in May."* 

Statistical proof. — The effect of cost on freight rates is 
best determinable from a long-range view. The period from 
1876 to 1906 brought a fairly constant and considerable 
decline in ocean freight rates. The cause of these reduc- 
tions, while partly due to the change in the purchasing 
power of money, was largely connected with improvements 
in the construction of vessels and with economies effected 

^ Frank Andrews, Ocean Freight Rates, p. 8. See also Giapter 
XII. 



THEORY OF RATE-MAKING 



493 



in ship operation and cargo handling. The greater volume 
and regularity of trade also contributed to the general result 
of reducing the cost of transportation. Undoubtedly the law 
of supply and demand likewise afifected the rates. 

The following table shows that ocean freight rates drop- 
ped from 1884 to 1903, very much more sharply than the 
general price level during the same period : 

OCEAN RATES OF FREIGHT, INWARD AND OUTWARD 

Statement showing the percentage fluctuations in mean yearly freignt 
rates between the United Kingdom and certain ports abroad during each 
of the years, 1884 to 1903, as compared with mean rates for the year 
1900. The percentage fluctuations in wholesale prices of commodities 
are added for comparison. (1900 figures equal 100 per cent.) 



OCEAN FREIGHT RATES 


Mean of 
Preceding 
Columns 


Index Number 
of Wholesale 


Yec:r 


Inward 


Outward 


Prices of 

Commodities.* 


1884 


121.7 

106.9 

98.0 

94.6 

107.3 

125.4 

102.8 

104.4 

84.3 

84.8 

81.2 

74.8 

82.8 

81.8 

96.5 

83.7 

100.0 

69.1 

65.2 

66.6 


110.7 

101.0 

105.0 

105.6 

114.0 

119.2 

110.5 

95.5 

89.3 

82.3 

78.3 

75.7 

76.0 

84.0 

88.9 

91.7 

100.0 

80.8 

76.1 

78.9 


116.2 

104.0 

101.5 

100.1 

110.7 

122.3 

106.7 

100.0 

86.8 

83.6 

79.8 

75.3 

79.4 

82.9 

92.7 

87.7 

100.0 

75.0 

70.7 

72.8 


106 1 


1885 


99.8 


1886 


94 4 


1887 


92.2 


1888 


95 3 


1889 


97.1 


1890 


99 5 


1891 


101.1 


1892 


96 3 


1893 


94.6 


1894 


90.3 


1895 


86.8 


1896 


83.9 


1897 


85.7 


1898 


88.5 


1899 


89.5 


1900 


100.0 


1901 : . 


95.2 


1902 


94.7 


1903 


94.4 







* See "Report on Whole-ale and Retail Prices" (House of Commons 
Paper, No. 321, of 1903) , p. 34. The figures have been converted to the 
basis of 1900 as the standard year. 



494 OCEAN SHIPPING 

Cost factor not generally felt. — But beyond such a 
general movement the eflfect of cost on ocean transporta- 
tion is not, as a rule, easily traced. On the contrary, cases 
may be cited where the distance covered by steamers plays 
a relatively unimportant part in the calculation of freight 
rates. If the cost decided the rate, a higher rate would 
have to be charged for a longer haul; but this is not the 
case. The same charges often prevail to ports whose dis- 
tance from the point of shipment varies by hundreds of miles. 
We have referred in a previous chapter to the so-called 
"range" clauses attached to charter parties, which mean 
that the same freight rates are paid by the shipper to a 
number of European ports, or to any port, say, between 
Baltimore and Boston when destined for America. 

Competitive nature of ocean rates. — Mr. Lawrence K. 
Sherman, Vice-President of W. R. Grace & Company, de- 
scribed the situation well when he said: 

"Ocean rates are not a question of cost and distance. 
They are a question of competitive conditions. The field 
is wide open and you have to make rates that will get the 
business." 

Another reason why rates are not changed in proportion 
to distance is the relative importance of terminal expenses, 
which in some cases exceeds the cost of the haul. Again, 
frequently, two steamers compete for the same traffic hav- 
ing entirely different operating expenses, but the costly 
steamer, if it wishes to get the freight, cannot charge more 
for equal service than the cheap vessel. A good example of 
this is the traffic in the Pacific Ocean. Here expensive 
American steamers compete with Japanese steamers, which, 
beside being often more cheaply built and invariably more 
cheaply operated, are subsidized by the Japanese govern- 
ment. That government in turn assumes the right to regu- 



THEORY OF RATE-MAKING 493 

late all inward and outward rates on the products of Japan. 
It regulates the sailing dates and routes of subsidized boats 
and the rates which these boats may charge for export and 
import cargo, being guided mainly by the desire to build 
up the foreign trade of that country. All other boats which 
compete with these Japanese lines have to adjust their rate 
charges to the standard set by the Japanese government. 
Thus, the item of competition wholly overshadows the con- 
sideration of operating expenses in the determination of 
rates. Naturally, the desire to come out ahead being the 
prime consideration in the steamship business, as m all 
business, the general average of rates charged cannot for 
any length of time fall below the minimum set by the oper- 
ating expenses ; but in individual cases other factors are of 
more importance in the setting of rates. 

Charging "what the traffic will bear." — We have seen 
what determines the minimum of rate and now turn to a 
discussion of the maximum. The shipowner's aim is natu- 
rally to receive as large a sum over and above the minimum 
as is possible. How far he can go depends upon the degree 
of competition to which he is exposed and upon the rela- 
tion of supply to demand ; where competition is eliminated 
permanently or temporarily, either by agreement or by com- 
plete control through ownership. 

The shipping company in this case charges "what the 
traffic will bear." It is a difficult and complicated task to 
determine this. Innumerable factors affecting production 
costs in different centres of the commercial world have to 
be considered, whose analysis requires an equally thorough 
knowledge of economic geography, the international wage 
scale, tariffs, and rail and water rates from and to all the 
competitive points. 

A thorough understanding of all these factors frequently 



496 



OCEAN SHIPPING 



precludes the charging of exorbitant rates, as appears from 
the following statement made by P. A. S. Franklin, Presi- 
dent of the International Mercantile Marine Company : 

"The safety valve against the charging of exorbitant 
freight rates is in reality the lines' own interest to do every- 
thing in their power to foster trade, and to do nothing 
which would have a tendency to restrain it." 

Absolute monopoly unlikely, therefore violent fluctua- 
tion of rates. — At any rate monopolistic control is not 
the normal condition prevailing in ocean trading. Usually 
competition exists and holds the door open for the entrance 
of the restricting influence of supply and demand. The 
result is that ocean rates fluctuate violently — charter rates 
only more so than liner rates. The following chart, taken 
from Kirkaldy, The British Shipping Industry, gives the 
fluctuations in mean yearly freight rates from 1884 to 1912 : 

FLUCTUATIONS IN MEAN YEARLY OCEAN 

FREIGHT RATES 
(Based on calculations of British Board of Trade) 



^i: 



I 



B«iDcw«rd rtclgU 

Om Suodwd T«r 



!;i: 



is; 



\ 



I 



\m 



THEORY OF RATE-MAKING 497 

This chart, representing general means, reflects only im- 
perfectly the wide range of fluctuations, which is the second 
characteristic of ocean rates to be discussed. The general 
freight level shows only the effect of great events, such as 
the British Engineers' strike of 1897, the Spanish-American 
War and the South African War. The high rates of 1898-9 
set shipbuilding yards feverishly busy. In 1900 the new 
tonnage flooded the market, and its effect was accentuated 
by the release of ships chartered by the British government 
in the Boer war. Hence the depression after 1900. The 
large increase in freight rates since 1908, particularly since 
191 1, is due to various strikes, such as the British coal 
strike of 191 1, to the closure of the Dardanelles during the 
Balkan wars, with its effect upon insurance rates, and par- 
ticularly to the abstention on the part of British shipbuilders 
during the preceding period of depression. 

Charter rates fluctuate most. — The nature of the 
charter traffic causes the rates to fluctuate more widely than 
line rates. Sometimes within a week or two the charter 
rates in a given direction will rise three hundred per cent. 
This extraordinary degree of fluctu^ion is due to the fact 
that charter rates depend more intimately upon supply and 
demand than perhaps any other prices that can be named. 
If a shipper is bound by contract to ship a certain cargo at 
a certain date, only the ships that happen to be at hand at 
the time are available; all other ships, even those that are 
only a relatively short distance away, do not exist as a 
possible supply. This relation between the urgency of mak- 
ing a shipment and the impossibility of adjusting the supply 
of vessel tonnage with sufficient promptness to the existing 
demands makes the charter rate a marginal rate. That is 
to say, if the amount of freight calling for shipment exceeds 
the amount of vessel tonnage offered, this excess freight, 



498 OCEAN SHIPPING 

representing the margin, cannot be shipped at all. It is, 
therefore, the fear on the part of the shipper of being left 
altogether without shipping facilities that enables the car- 
rier to charge a rate far in excess of that which might have 
prevailed only a few days earlier, in the same locality, when 
the relation between the freight and space was dififerent. 

Just as the urgent demand of the shipper for space at a 
given time drives freight rates to abnormal heights, so the 
opposite is the case when a steamer is embarrassed for a 
cargo. Here the limitations placed on the cheapness of 
water transportation manifest themselves. The boat must 
be filled, the operating costs being the same whether ten or 
ten thousand tons are carried. When, therefore, a steamer 
has been disappointed in its expectation of filling up, it will 
take freight for extremely low rates rather than go out 
half empty. It is then said that the boat offers "distress 
room." Such cases occur frequently in the regular line 
business, but are even more common in berth traffic. A 
carrier, in his anxiety to fill space left vacant by belated 
interior freight, negotiates for "spot cargo," and the ship- 
per, taking advantage of the carrier's anxiety, squeezes out 
a low rate. 

Effect of the war on rates. — The influences which 
affect supply and demand are too numerous to permit of a 
detailed analysis, but, in general, we may say that the vol- 
ume of ocean space per tonnage available in a given trade 
is subject to increase in at least two ways: first and most 
important, by the building of new tonnage in excess of 
losses; secondly, by releasing a number of ships from one 
branch of the traffic to place them in another. Decreases, 
on the other hand, are generally due to vessels being at- 
tracted from the trade in question. Maritime disasters play 
a relatively small part. Wars play a very important part 



THEORY OF RATE-MAKING 



499 



in reducing the supply of tonnage and lead to excessive 
rate increases. The following charts* show the effect of the 
European war on freight rates : 




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RATE FLUCTUATIONS DURING THE WAR AND AFTER 
From Annual Report Chamber of Shipping of the United Kingdom 

Effect of crops on rates. — The demand, on the other 
hand, is subject to a different set of variations, among 
which the conditions of harvests in the various regions of 
the world are the most important. 

"Poor crops tend to bring rates down, while, on the other 
hand, abundant harvests promise higher freight rates, which 

^ From Annual Report of the chamber of Shipping of the United 
Kingdom 1919, 1920, pp. 153 and ISS. 



500 OCEAN SHIPPING 

may be still further increased if the traffic in some other 
articles causes another strong demand for 'ocean room' 
just about the time the produce of the harvest is to be 
shipped. 

"Another instance of a considerable supply of 'ocean 
room' being thrown upon the freight market was afforded 
in 1903, when the wheat harvest in Australia failed. While 
the wheat was still standing in the fields a number of vessels 
started for Australian ports to carry a share of the expected 
wheat surplus to Europe. Meanwhile unfavorable weather 
conditions resulted in a crop failure and grain cargoes in 
Australia were scarce. A considerable number of ships were 
unexpectedly thrown out of employment. Some of them 
sailed to the Pacific coast of the United States for loads of 
wheat or barley, while others went elsewhere in search of 
cargoes. This condition no doubt contributed toward re- 
ducing the mean rate of wheat between San Francisco and 
the United Kingdom from about 32 cents per bushel in 
1902 to about 18 cents in 1903." 

"The rates which had declined at th^ close of the South 
African war continued rather low until the big harvest in 
the United States in 1905, when there was a revival in the 
demand for ships for charter, especially on the Atlantic sea- 
board. It had been reported that the charter traffic had 
entirely died out at the four largest ports along the North 
Atlantic coast, but in the fall of 1905 there was a consider- 
able number of grain charters made from Baltimore and 
Boston."^ 

* Frank Andrews — Ocean Freight Rates, pp. 7, 8. 



THEORY OF RATE-MAKING 501 

REFERENCES 

Brown, H. G. Principles of Commerce. Part III. (1918). 

Hough, B. O. Ocean Traffic and Trade. Chap. VI. (1915). 

HuEBNER, G. G. Ocean Steamship Traffic Management. Part III. 
(1920). 

Lenz, p. Die Konzentration in Seeschiffahrtsgewerbe. (1914). 

Johnson and Huebner. Principles of Ocean Transportation. Chap 
XXI. (1919). 

Johnson and., Van Metre. Principles of Railroad Transportation 
Chaps. XXI and XXII. (1919). 

LuBiN, D. Cost of Ocean Transportation. Sen. Doc. No. 423. 
(1914). 

Smith, J. R. The Ocean Carrier. Part II. (1908). 

United States. Shipping Board. Ocean Rates and Terminal 
Charges. Report by Emory R. Johnson. (1919). 
Shipping Board. Division of Planning and Statistics. The Rela- 
tive Desirability of Ships Operating in Four Trade Routes. 
(1919). 

Department of Agriculture. Bureau of Statistics. Ocean 
Freight Rates and the Conditions Affecting them. Report Iqf 
Frank Andrews. (1907), 



CHAPTER XXVI 
RATE PRACTICE AND RATE CONTROL 

Negotiating charter rates. — In a previous chapter we 
discussed rate-making only in a general way and from a 
theoretical standpoint. The principles laid down in that 
chapter are subjected to rnany modifications when applied 
to actual cases. These modifications are relatively few when 
the problem of rate-making is that of fixing charges for the 
transportation of a full vessel cargo, composed of a single 
commodity. This is comparatively a simple matter. The 
rate charged for the use of the boat is almost entirely a 
matter of supply and demand and of bargaining ability on 
the part of the two parties involved in the deal. 

Mr. Ruggles in a report to the Shipping Board on the 
methods of rate fixing corroborates this view : "When the 
problem of rate-making is that of fixing charges for the 
transportation of a full vessel cargo composed of a single 
commodity to be transported to any given destination in 
a ship whose size and speed are known, and when the 
normal capital costs and operating expenses of a vessel 
of the class to which the ship in question belongs are 
known, the task is comparatively easy. If the cost data 
have previously been worked out for vessels of the class 
to which the ship being considered belongs, it is neces- 
sary only to calculate the expenses for the time that 
will be consumed in making the voyage, including time spent 
at terminals, and to divide the total capital costs and cur- 
rent expenses by the number of tons or number of units, 
of cargo, and the quotient will be the freight rate corres- 

502 



RATE PRACTICE AND RATE CONTROL 503 

ponding to the costs of the service." The amount which 
the ship-owner can charge above this figure, depends on 
the market conditions. 

Complexity of rates on general cargo. — An entirely dif- 
ferent question is that of fixing rates applicable to "general 
cargo." This term, as we have seen, includes a wide variety 
of commodities, each of which possesses its own intrinsic 
peculiarities ; they may be shipped singly or in large num- 
bers, or packed in a great many different ways. The prob- 
lem of rate-making thus becomes an extremely complicated 
matter. 

When we come to apply our rate theories to actual cases, 
we find it neither possible nor desirable to use the cost of 
the service as a basis of rate calculations. In the first place, 
this task would overtax the capacity of the most skilful cost 
accountant. "The ascertainment of the costs of individual 
transportation services increases in difficulty, at more than 
a proportionate ratio, with the increase in the number and 
variety of services performed by a carrier, whether by rail- 
road or ocean vessel. The costs of service assignable 
to the several dissimilar articles can only be approxi- 
mately determined, and resort to estimates and to arbitrary 
rules for the allocation of costs is necessary in working 
out a schedule of freight rates based on the costs of service. 
But the fact that perfection cannot be achieved is never a 
reason for not seeking to secure the best obtainable results ; 
and this rule of conduct holds true of efforts to determine 
freight rates corresponding to the costs of service. 

"Having ascertained the aggregate income which a given 
vessel carrying mixed cargo must secure to meet theT costs 
and expenses of a voyage or of the period of time required 
to perform the services for which charges are to be levied, 



504 OCEAN SHIPPING 

the rate-maker must allocate the total amount among the 
several commodities by considering the space occupied by 
the different articles, their relative weights, their liability 
to damage, and, in short, the various factors affecting 
relative costs of service. The judgment and expert knowl- 
edge of the rate-maker, rather than accounting or other rules, 
must often determine the decision reached. Moreover, as 
is well known, the rates finally decided upon must neces- 
sarily reflect differences in the value of the commodities, as 
well as dissimilarities in costs of service, if the rates are to 
be equitable to shippers and are to be in harmony with 
industrial and trade requirements. The cost of service, a.s a 
basis of freight rates, has its limitations."^ 

Undesirable to base rate on cost. — Secondly, it would 
be utterly undesirable to base the rate charge for carrying a 
particular commodity or even a particular shipment on the 
basis of the cost of the service rendered. It would be neither 
wise nor equitable to do so. It would be unwise because 
bulky products of low value would be overcharged, in many 
cases excluding them from the possibility of ocean trans- 
portation. On the other hand, articles of high value would 
pay considerably less than what their price would permit. 
Therefore, the value of the commodity and the value of the 
transportation service to the shipper rather than the cost of 
the service rendered, is emphasized in fixing liner rates. 
Besides, differentials, risks of transportation, perishability of 
commodities, and other physical and intrinsic characteristics 
affecting the classification, packing, handling and other inci- 
dents of transportation, are to be considered. It is an ex- 
tremely delicate task to fix the rate on hundreds or even 

1 Ruggles in Report to Shipping Board on "Ocean Rates" by 
Emory R. Johnson, p. 56^. 



RATE PRACTICE AND RATE CONTROL SOS 

thousands of commodities, striking in each case the happy 
medium which will assure the carrier a fair profit in the 
face of competition and encourage the shipper to build up a 
strong and permanent trade. 

The rate problem of the liner is very similar to that of the 
railroad companies and what applies to the latter also holds 
true of the fiOrmer. We can, therefore, benefit from the 
following general rules laid down for the railroad traffic 
manager. 

"To estimate the ability of an article to pay freight, a 
thorough knowledge must be had of the costs of production, 
of the market prices at different points, and of the nature of 
the demand for the article-whether the article is considered 
a necessity or whether some other commodity can readily 
be substituted for it. The service of freight transportation 
consists of taking goods from the producer or maker to the 
user, and the person who fixes the rates for that service must 
study the conditions of production and the nature of the 
consumer's market. Transportation charges must be such 
as will produce a net revenue for the carrier and will stimu- 
late the development of traffic. 

Actual rate based on four considerations. — "In general 
it may be said that the decisions of a traffic officer with 
respect to rates are the resultant of four forces : ( i ) The 
charges he makes must have a proper relation to those made 
by competing roads and routes, and in spite of railway 
integration there is much actual competition in the trans- 
portation business ; (2) the interest of the shipper must be 
considered, what he can pay for transportation and what 
charges will permit his industry to flourish and the traffic of 
the railroad to increase; (3) the revenue of the railway 
must be safeguarded. As far as it is practicable, each par- 



S06 OCEAN SHIPPING 

ticular fate must cover operating costs and contribute some- 
thing toward fixed charges and profits, while the rates as a 
whole must surely be kept on a level that will maintain the 
company in a prosperous condition. (4) The requirements 
of the public as a whole must be complied with.' 

Rate policy and stowage plan. — An important con- 
sideration which affects the rate policy of a steamship line 
is the desire to secure a load which uses the ship's space 
with maximum economy and produces the maximum rev- 
enue. We have seen that a mixed cargo is better than a 
homogeneous one. Among the manifold classes of general 
freight are some which "weigh more than they measure," 
others which "measure more than they weigh." A desirable 
cargo is one which consists partly of "deadweight," that is 
heavy cargo, and partly of light or measurement cargo. That 
combination of these two kinds of icargo which nets the 
largest revenue is called in the vernacular of the shipping 
man the "payable tons."^ This varies with every voyage ac- 
cording to the kind of cargo offering, weather conditions etc. 

The rate charged for a given commodity is therefore 
largely dependent upon the way it happens to fit in with the 
rest of the general cargo which a traffic man is trying to 
mould into a safe and paying load. 

How a steamship company uses its rate policy to bring 
about this effect was explained by R. P. Schwerin, then 
vice-president of the Pacific Mail Steamship Company in his 
testimony before the Senate Committee on Interoceanic 
Canals, when he said: 

"Naturally we would go after the best package or best 

Vohnson and Van Metre, Principles of Railroad Transportation, 

p. 357. 
2R. E. Annin, Ocean Shipping, p. ISO. 



RATE PRACTICE AND RATE CONTROL 507 

paying class of freight first and establish a service of volume 
and regularity that would take care of all the freight 
offering; we would hold up our rates as high as consistent 
with the filling of our ships with the class of cargo that we 
wanted and at times reduce it to induce movement of ton- 
nage in case there was a shortage. If too much freight werQ 
offering, we might raise the rate on iron in order to take a 
larger portion of general merchandise. If general merchan- 
dise were not offering we might lower the rate on iron to fill 
the ship. This is the general policy pursued." 

A practical application. — This problem of cargo se- 
lection can best be explained by citing a practical case.^ 
Take a boat of 7,300 D.W.T. which requires for its trip 1,300 
tons of fuel, water and stores, leaving a net cargo capacity 
of 6,000 tons. The space available for general cargo is 
300,000 cubic feet. That means that the cubic capacity of 
the ship is 125 per cent of her weight capacity. For 6,000 
tons deadweight would give at 40 cubic feet to the ton only 
240,000 cubic feet. 300,000 cubic feet are 25 per cent more. 
As far as the rate is concerned it follows that the vessel will 
net the same revenue whether her freight be charged at a 
given rate per 2,240 pounds or at a rate of 20 per cent lower 
per 40 cubic feet. In other words, 6,000 tons weight at $30 
per ton weight will give the same result as 7,500 tons 
measurement at $24 per ton measurement. Mr. R. E. Annin , 
makes this point considerably clearer by showing the result 
of several cargoes upon the loading of the ship and upon 
the revenue obtained. He first takes the case of a cargo of 
cbpper, measuring 10 cubic feet to the weight ton. All the 
ship could take would be 6,000 tons which would fill only 

.. J Adapted from R. E. Annin, op. cii., p. 148#. 



508 OCEAN SHIPPING 

one-fifth, 60,000 cubic feet of the available space of 300,000 
cubic feet. At $30 a ton, the revenue would amount to 
$180,000. A cargo of cotton gives an entirely different pic- 
ture. Ordinary cotton stows about 125 cubic feet to the ton, 
density cotton about 90 and high density as low as 80. We 
assume a cargo of density cotton. 300,000 cubic feet equal 
7,500 measurement tons of 40 cubic feet each; at $30 a ton 
they would net a revenue of $225,000. But these 7,500 
measurement tons would weigh only 3,333 weight tons thus 
utilizing only a little over half the deadweight capacity of the 
vessel. A much better result is achieved by loading copper 
and cotton instead of loading either copper or cotton alone. 
In that case the manifest shows : 

3,000 tons copper, 30,000 feet @ $30 per, 2,240 pounds $ 90,000 

3,000 tons cotton, 270,000 feet @ $30 per 40 cubic feet 202,500 

6,000 tons weight, 300,000 feet $292,500 

with such a cargo the boat would be utilizing both its 
deadweight capacity and its cubic tonnage ; the vessel would 
be "full and down." The revenue would be $292,500 as 
against $180,000 in the case of the copper cargo and $225,000 
in the case of the cotton cargo. The "payable tons" would 
be: 

Copper (by weight) 3,000 tons of 2,240 pounds 

Cotton (by measurement) . . .6,750 tons of 40 cubic feet 

Payable tons 9,750 weight and measurement 

But Mr. Annin adds: "A combination of conditions that 
would permit this exact result is about as common as the 
man who drew the grand prize in the lottery." ^ But similar 

(l)The following example prepared by a practical steamship man, shows 



RATE PRACTICE AND RATE CONTROL S09 

combinations can be arranged if its underlying principles 
are understood. To throw additional light upon these we 
add the following remarks taken from Taylor's "Stowage of 
Ship Cargoes"^ referred to above : 

"Any commodity that has a stowage factor of over 40 
cubic feet is called 'measurement freight,' and a com- 
modity having a stowage factor of less than 40 cubic feet 
per ton is called "deadweight cargo." A simple calculation 
will show how much measurement freight and how much 
deadweight can be carried on a given vessel. Assume 
that the vessel is of 6,500 deadweight tons and has a cargo 
space of 360,000 cubic feet. After deducting 500 tons for 



how to calculate the proper amotints of cargoes which may profitably be 
stowed in a vessel. 

Vessel 5,000 tons deadweight capacity or 275,000 cubic feet 

deadweight capacity. 
C&rgo: copper measuring 9 cubic feet to the ton; 

lumber measuring on an average 100 cubic feet to the too. 
let X equal weight of copper to be loaded 
lety " " "lumber" " 'A 

X + y = 5,000 
9x + 100y = 275,000 
9x + 9y= 45,000 
9x = 45,000 — 9y 

45,000 — 9y + lOOy = 275,000 
91y = 230,000 
y = 2,575.5 
X = 2,472.5 
2,475.5 tons of copper equals 22,152.5 cubic feet 
2,575.5 tons of lumber equals 252,750 cubic feet 

274,902.5 cubic feet 

275,000 equals total freight 



Pages 40jf. 



SIO OCEAN SHIPPING 

fuel and stores, it is found that the number of cubic feet 

, , . , . 360,000 ^r. s. . , 

per dead- weight ton is , or 60. Assume that the 

^ ^ 6,000 

measurement freight has a stowage factor of 80 and the 
deadweight a stowage factor of 20. Deduct from the aver- 
age space per deadweight ton (60) the stowage factor of 
the deadweight cargo (20), and multiply the remainder {40) 
by the cargo tonnage of the vessel. This gives 40x6,000, or 
240,000. Divide by the difference between the stowage 
factors of the two commodities, which is 60. The result 
(4,000) is the number of tons of measurement freight that 
should be carried, and the difference between this figure 
and the total cargo that can be carried, or 2,000, is the num- 
ber of tons of deadweight cargo. Working backwards 
it will be seen that the vessel under this arrangement carries 
the maximum weight and volume, for the weight of the 
two commodities is 6,000 tons and the volume is 4,000X80 
+2,000X20, or 360,000 cubic feet. 

The formula which may be used for the above computa- 
tion is as follows; 

-ii=~ — — 

b— a 
In which — 

X^=number of tons taken of the lighter of two commodities. 

V=cargo capacity in cubic feet. 

T^otal number of tons of cargo that can be carried (dead-weight 

tonnage less tonnage of fuel, stores, etc.) 
a=stowage factor of the heavier commodity. 
b=stowage factor of the lighter commodity. 
In the illustration just given, substitution would be made as follows: 

/ 360,000 <,n\6 000 
Y— V 6.000 ~ / ' (60—20) 6,000_.nnn . , 

^ ^0=20 =^ 60^— *'°°° *°"' °^ m^^^^. 

ment cargo. 



RATE PRACTICE AND RATE CONTROL 511 

"Small stowage" and dunnage. — Especially low rates 
are often charged on "small stowage" or "beam filling" which 
means cargo which can be utilized in filling the spaces which 
otherwise would remain unfilled owing to irregularity in 
size and shape of general cargo, the interruption of the cargo 
held by staunchions and similar conditions. If shippers give 
permission to the carrier that rough lumber be used as dun- 
nage, it is wise to transport such cargo at a very low rate. 

Exceptional circumstances affect rates. — The circum- 
stances surrounding particular shipments again have a con- 
siderable bearing upon the rates charged, as for instance, 
the delay of, certain shipments upon which the carrier 
counted to fill his space. Under such conditions the carrier 
is frequently willing to quote rates considerably below the 
regular tariff and over contract rates. It sometimes happens 
that grain, which is the commodity generally used to fill such 
an empty space, is carried free of charge. The result is 
that even in a liner rate, considerable fluctuations occur al- 
though they are not as general and as violent as in the 
charter market. 

"You no doubt are aware that freight rates, particularly 
for agricultural products, change almost daily and some 
times several times during the day, depending upon the de- 
mand or otherwise for freight room. Rates quoted to-day 
would be only for refusal for twenty-four hours, and they 
are constantly influenced by the fluctuating demand for 
room in the various steamers. . . . Frequently wheat has 
been carried between the United States and London free of 
any charge, being simply used for ballast in the steamers, 
and at other times the rate has advanced to lod. and I2d. 
per bushel."' 

'^ See David Lubin, The Cost of Ocean Transportation, p. 4. 



512 OCEAN SHIPPING 

Rate contracts, — So far we have laid emphasis upon 
difficulties arising primarily from the large variety of the 
commodities carried, but the question of rate-making in the 
liner business is further complicated by differences sur- 
rounding the relation of the carrier to his competitor, the 
relation of the carrier to the shipper, and the time and place 
of the shipment. In the first place, the rate is considerably 
influenced by the presence or absence of agreements among 
the carriers. As we have seen, the extent to which confer- 
ences usurp the rate-making power of individual carriers 
differs considerably in different trades. Then again, con- 
tracts may have been made with individual shippers, either 
by individual members of conferences or with the confer- 
ence lines as a whole. Contract rates, as a rule, are lower 
than the regular tariff rates, which seems justified as long 
as it is the general policy of the line to contract with all 
shippers large or small on the same terms. "Joint con- 
tracts," entered jointly by all the members of a conference, 
usually cover a longer period than individual contracts. 
The reason is that it is easier for a group of lines to guar- 
antee regular sailings at regular intervals over a long period 
than for individual companies. 

Economic advantages of rate contracts. — ^The economic 
advantage of contracts is to be seen in the fact that they 
reduce the element of speculation to a minimum. As far 
as the North Atlantic business is concerned the tendency 
is to substitute the long time, or season, contract between the 
shipper and the regular liner whenever possible for the old- 
fashioned method of shipping by chartered tramps. This 
tendency is to be noticed in the grain trade, the cotton trade, 
and, to a certain extent, in the coal trade. Besides this, 
other items have become the objects of long-time contracts 



RATE PRACTICE AND RATE CONTROL 513 

in recent years, namely, provisions consisting of barreled 
beef, boxed bacon, and lard in packages and cotton-seed oil 
in barrels. 

The question of discrimination. — In this connection 
the question should be discussed whether equal rates should 
be charged all shippers irrespective of the volume of freight 
offered. Both railroads and steamships have, during cer- 
tain periods of the past, discriminated in favor of the large 
shippers. As far as the railroads are concerned the Hep- 
burn Act of 1906 put an end to this practice. As a matter 
of fact, the railroads themselves have learned to appreciate 
that discrimination in favor of the large shipper is based 
upon an unsound principle, for, on the one hand, if all are 
given fair chances, the small shipper of to-day is very often 
the large shipper of to-morrow. On the other hand, the 
large shipper, subsidized by discriminating rates, rapidly in- 
creases the volume of his shipments and can periodically 
point to this increase as a reason for additional reduction of 
rates. With modifications, the same applies to steamships. 
The principle of equal rates to large and small shippers is 
gradually being recognized in ocean transportation. To dis- 
criminate against the small shipper is injurious to the 
country at large in so far as it prevents a wide diffusion of 
the prosperity which arises from successful export trade. 

Method of quoting freight rates. — Considerable 
changes have occurred during recent years which affect the 
method of quoting freight rates. The old measure, which 
is still widely used, was that of basing the rate upon the 
cargo ton or measurement ton. This means that the ship- 
ment will be charged so much per ton of 2,240 pounds or per 
40 cubic feet, whichever may bring the larger revenue to 
the steamship company. The majority of commodities 



514 OCEAN SHIPPING 

were classed as "measurement goods." This has long been 
the only distinction made. The first improvement was the 
introduction of a rate quoted for cottonseed oil per barrel. 
This practice of quoting per package or other unit is spread- 
ing. Another tendency is towards substituting a ton of 2,000 
pounds for that of 2,240, and quoting a rate on the basis of 
100 pounds. The most important development however is, 
undoubtedly, the growing importance of the ocean traffic. 
We, therefore, go into this matter rather fully. 

Origin of ocean tariffs. — The development of ocean 
tariffs has followed entirely different lines from that of 
railway tariffs. The latter are as old as railroads them- 
selves. On the other hand, if we include in our considera- 
tion shipping of the classic stage, that is shipping of the 
days when the mariner always kept the coast in sight, or 
stayed within the boundaries of the Mediterranean Sea, 
navigation has existed for centuries, perhaps even thousands 
of years without knowing or using tariffs. The first be- 
ginnings are found during the 17th and 18th centuries, 
but they were temporary and exceptional. The real history 
of ocean tariffs does not begin until about 1870, or there- 
abouts. The development since then has been so rapid 
that we probably do not exaggerate if we say that nowadays 
ocean tariffs form the basis of price calculation and price 
formation in most shipping transactions where general 
freight is concerned. 

Nature of a tariff. — In order to understand the his- 
torical development we should first try to understand the 
nature of a tariff. Tariffs are merely forms of price forma- 
tion. In transportation, as well as in all other branches 
of commercial activity, a price may be either the result of 
a negotiation^ revolving around a definite service or trans- 



RATE PRACTICE AND RATE CONTROL SIS 

action; or else a price might be determined for entire 
groups of like services or commodities. In the latter case 
the buyer usually knows beforehand what charges he has 
to expect and he is at liberty to either accept or refuse the 
terms as fixed in the tariff which is a list of predetermined 
prices for groups or classes for like services or commodities. 
We thus see that three main differences exist between the 
price resulting from individual negotiation and a tariff. 
In the first place the tariff is meant to apply to a series of 
services or transactions. Secondly, the calculation of the 
tariff rate is based upon the application of the tariff during 
a given period of time. Thirdly, the tariff is one-sidedly 
fixed by the seller. 

From this analysis of the nature of a tariff the following 
conclusions may be drawn regarding the use of tariffs in 
ocean transportation. Several prerequisites have to be 
supplied before a tariff can be introduced in the shipping 
business. In the first place there must be a division between 
the buyer and seller of ocean transportation as a commodity. 
This division, as we have seen, appears only at a relatively 
advanced stage of transportation history. Furthermore, the 
tariff presupposes the demand for a more or less pronounced 
regularity and continuity of services of like nature. As 
long as each voyage represents a problem by itself, differ- 
ing essentially from any other voyjtge, tariff is unthinkable. 
Finally the successful introduction of a tariff requires 
a certain authority on the part of the shipping companies, 
and this is lacking as long as the ownership of vessels is 
widely scattered among a large number of small shipowners 
who hotly compete for the freight business offered. The 
last prerequisite explains largely why the real history of 
tariff development, in ocean shipping does not begin until' 
about 1870. From that time on we have observed a grow- 



516 OCEAN SHIPPING 

ing tendency toward concentration and combination and 
the building up of large portmanteau companies who again 
form groups among themselves and reduce competition 
through agreements and conferences. It was this move- 
ment which gave to the steamship companies the power to 
dictate the rates to be charged, without which tariff cannot 
be enforced. 

Oldest ocean tariffs known. — The oldest tariffs were 
those used in connection with the "Bortfahrt" which we 
described in a preceding chapter. The motives of their 
introduction, and the aims which were to be reached by 
their application differ materially from those which prompt 
modern steamship companies to their use. These old 
tariffs must be considered in connection with the general 
conditions prevailing at that time, viz. during the 17th and 
18th centuries. The tariffs were enforced by the city coun- 
cils and were not dictated to the shippers by the carrier. The 
tariff was formulated with the interest of the community 
in view, while the modern tariff follows the principle of 
maximum return to the steamship company. The follow- 
ing is a translation of part of the tariff which applied to 
the "Bortfahrt" between Hamburg and Amsterdam, and 
which was issued on September 25, 1613. 

TARIFF 

Of payment to be made to the carrier engaged in the 
line service between Hamburg and Amsterdam and re- 
turn; the summer rates apply to the period beginning on 
the 19th of February (or 1st of March) and ending 21st 
of September (or October 1st) ; the winter rates apply 
during the remaining time of the year. 



RATE PRACTICE AND RATE CONTROL 



517 



COMMODITIES 



From Hamburg 


From Amsterdam 


To Amsterdam 


To Hamburg 


Winter 


Summer 


Winter 


Summer 


Rate 


Rate 


Rate 


Rate 




1 1 


11 


l| 


.04 


.04H 


.03 


.03H 


4.10 


5. 


4.08 


5. 






4.04 


4.12 


5.10 


6. 


5.08 


6. 


4.10 


5. 


4.08 


S. 


3.10 


4. 


3.08 


4. 


2.10 


3. 


2.08 


3. 


4.10 


5. 


4.08 


8. 


6.10 


7. 


.... 





6. 


5.10 


8. 


8.08 


.04 


.Q5H 


.04 


.04H 


1. 


1.05 


1. 


1.04 


.10 


.12 


.08 


.10 


.05 


.05H 


.04 


■ OiH 


.12H 


.14 


.10 


.12 


2.10 


2.15 


2.08 


2.12 


.12)^ 


.15 


.10 


.12 


.06H 


.07 


.05 


.06 


1.05 


1.10 


1.04 


1.08 


.03 


.03H 




.... 


.04 


.04H 


.03 


.03H 


.04 


.04K 


.02H 


.03 


1.05 


1.10 


1.04 


1.08 


2.10 


3. 


2.08 


3. 


.08 


.09 


.06M 


.07 


.04 


.04K 







Potash, per 100 lbs 

Fish, per burden 

Smoked herring, per burden. . . . 

Wheat, per burden 

Rye, per burden 

Barley, per burden 

Oats 

Tallow, per burden (12 small kegs per 

burden) 

Hamburg beer, per btirden 

Iceland cod liver oil and Muscovite 

cod liver oil 

Tallow, in barrels, per 100 lbs. . , 

Ginger, per pkg. 500 lbs 

Almonds, rice, etc., per pkg 

Ivory, raw (per 100 lbs. : 

Indigo, per 100 lbs 

French wine, per bbl 

Honey, per ton 

Sugar, per 100 lbs. kegs 

Brazilian sugar, per case 

Steel rods, per lots. 

Copper or iron wire, loose or in lots 

per 100 lbs 

Figs and raisins, per baskets,. . . 

Syrup, per 1000 lbs 

Raw silk, bale 

Hemp, per 100 lbs 

Saltpeter, per 100 lbs 



Commodities not enumerated here and concerning the rate on 
which shipper and carrier cannot agree wiU be charged a rate to 
be determined by the aldermen. 

IN WITNESS WHEREOF, WE the Mayors and Councilors have 
hereunto set our hands and the official city seal. 

Decreed in the Senate and published September 25, anno domini 
1613. 

(This is a partial translation of the original tariff as published in 
the "Forschungen zur Hamburgischen HandeUgeschichte." Vol. II : 
Die Bortfahrt zwischen Hamburg, Bremen und Holland, Hamburg 
1898.) 

Principles underlying tariff structure. — On the whole 
this tariff follows about the same principles which we apply 
today in formulating modern tariffs. The weight and 
measurement of the commodities are both considered and, to 



518 OCEAN SHIPPING 

a certain extent, the price is also taken into consideration. 
But as we stated before, the general principle of price 
fixing took into consideration the interest of the community 
rather than that of the carrier. It is not quite easy to 
compare this 17th century tariff with our modern tariffs 
because the units of measurement are very different and the 
system of weights and measurements in use in 1613, was 
very undeveloped as compared with present conditions. The 
extent to which value is considered alongside with weight 
and volume of commodities is strikingly illustrated by the 
rates charged for the transportation of wheat, rye, barley 
and oats respectively. 

The distinction made between summer and winter rates 
is particularly interesting. It is easily explained by the 
fact that primitive sailing vessels such as must have been 
employed in this service, suffered very much more from 
the severities of winter storms than would be the case 
with modern steamers. We must remember that the ships 
of these days seldom measured more than about 2^ gross 
tons. The risk and hardships to which the officers and 
crew were exposed must have been considerably greater in 
winter time than during the summer months. Undoubtedly 
also, the time consumed during the voyage had a bearing 
upon the difference in winter and summer rates. The 
perfection of ship construction and ship operation, the 
advance made in nautical science and the improvements 
introduced for the purpose of greater safety of ocean trans- 
portation have rendered obsolete this subdivision of ocean 
freight tariffs into winter and summer schedules. 

"Tonnage scales" and "printed rates of freight." — As 
we stated before, these tariffs which regulated the freight 
charges of ships engaged in the ..line service «f the. 17th 
and 18th century, may be loxjl^ed . upon as th,^ prptptypes of 



RATE PRACTICE AND RATE CONTROL 519 

the modern tariff. Before taking up our present-day tariffs, 
another line of development should be followed up. The 
connection between the early tariffs and the present tariffs 
is only loose, and the line connecting the two phenomena 
is not unbroken. During the interval when prevailing 
conditions did not warrant the application of ocean freight 
tariffs, another instrument was used in the technique of 
price-formation. We refer to the tonnage scales, or tonnage 
schedules, also called printed rates of freight. These scales 
do not determine the actual freight to be charged on a given 
commodity, but merely serve to establish the degree of dif- 
ference which is to exist between the rates chargeable to dif- 
ferent commodities. These tonnage scales have considerable 
similarity with tariffs. They differ, however, in one essen- 
tial feature. They do not preclude individual negotiation, 
and that, after all, is the greatest advantage which the intro- 
duction and general application of ocean tariffs bring to the 
carrier and shipper alike. One might almost say that the 
tonnage scales are merely the foundation on which a tariff 
may be built up. In so far, however, as they afford a uni- 
form foundation to the individual negotiation of the amount 
which the carrier was to charge the shipper, the tonnage 
scales are properly considered in connection with the de- 
velopment of the modern ocean tariff. The introduction 
of the tonnage scale materially simplified the negotiation. 
When a shipper wanted to load a variety of commodities, 
it sufficed to negotiate one rate and this rate automatically 
applied to the other commodities, making up a shipment, 
their rates being determined by the tonnage scale. Thus 
we find clauses of the following nature 

"To load a full and complete cargo of sugar, in cases, 
and/other lawful merchandise. Freight to be paid per 
ton sugar net weight delivered and for other goods in a 



520 OCEAN SHIPPING 

fair proportion to sugar in cases, according to the Bahia 
Table- rates." 

This example shows that these tonnage scales were 
equally important in the charter and the berth traffic. 

"Tonnage scales" disregard value. — The tonnage scales 
themselves are based exclusively on weight and measure- 
ment and do not regard the value of the commodity. For 
that reason, tonnage scales do not cover the more valuable 
commodities. Their transportation is subject to freight 
charges arived at through individual negotiation. A good 
example is the East Indian trade where tonnage scales 
are used to this day, but where cargoes of special value, 
commonly known as "chow-chow cargo," are not covered by 
the "scales.'' Rugs, antiques, art treasures, mother-of-pearl, 
and similar commodities are excluded from the tonnage 
scale. 

The tonnage scales are built up on one base commodity 
which differs according to the geographic peculiarities of 
the particular trade to which the scale is to apply. Thus 
oats formed the basis of the old Riga scale. Wheat, that 
of "The London and Baltic printed rates of Freight," 
Jute, that of the Calcutta tonnage scale. In some cases the 
basis is furnished by a commodity which has long lost its 
supremacy in that particular field. An example of this 
would be a certain Black Sea scale where tallow was used 
as basis long after that commodity had lost its prime im- 
portance. 

The following example will serve as an illustration of a 
tonnage scale such as they were used in recent times ; — 



RATE PRACTICE AND RATE CONTROL 521 

LONDON PRINTED RATES OF FREIGHTi 

Edition of 1868 

HEMP (from Petersburg), Outshot, to pay % ; Half Clean }4 ; Co- 
dilla }i more than the Freight of Clean Hemp. 

(from Riga), Outshot, to pay 14; Pass %; Codilla 14 more 

than the Freight of Rhine Hemp. Polish and Rhine Hemp on 
the same footing. 

FLAX, in all cases, the same Freight as Hemp. 

TALLOW, to pay % the Freight of Clean Hemp on the Gross 

Weight. 
ASHES, to pay % the Freight of Clean Hemp on the Gross Weight. 
BRISTLES AND TANNED HIDES, to pay % the Freight of 

Clean Hemp per ton of 44 Poods, Gross. 
DRIED HIDES, to pay Ji more than the Freight of Clean Hemp 

per ton, Gross. 
WET OR SALTED HIDES, to pay % the Freight of Clean Hemp 

per ton. Gross. 
HAIR SKINS, to pay the same freight as Clean Hemp per ton of 

3,500 skins. 
ISINGLASS (in Bales), to pay the same Freight as Clean Hemp 

per ton, of 44 Poods, Gross. 

(in Casks), to pay 54 more than the Freight of Clean Hemp 

per ton of 44 Poods, Gross. 

BEES' WAX (in Mats), to pay % the Freight of Clean Hemp per 
ton of 63 Poods, Gross. 

(in Casks), to pay the same Freight as Clean Hemp per ton, 

63 Poods, Gross. 

WOOL, to pay double the Freight of ,Clean Hemp per ton, 63 Poods, 

Gross. 
MANUFACTURED HORSE HAIR, to pay double the Freight of 

Clean Hemp per ton of 44 Poods, Gross. 
HORSE MANES, to pay J4 more than the Freight of Clean Hemp 

per ton of 44 Poods, Gross. 
HORSE TAILS, to pay the same Freight as Clean Hemp per ton of 

44 Poods, Gross. 
FEATHERS, to pay the same Freight as Codilla Hemp per ton of 

44 Poods, Gross. _ 

LINENS, 80 Pieces Flems. 1 

90 Ditto Ravenducks. Equal to 

120 Ditto Drillings. % of 

80 Ditto Narrow, of 1 Ell. I a ton 

40 Ditto Broad, of 2 Ells. f of 

60 Ditto Sail Cloth Clean 

6,000 Archeans, Broad Diaper, Linens or Crash Hemp 

8,000 Ditto Narrow Linen, Diaper, or HuckabackJ 

1 From George Harrison, The Freighter's Guide and Corn Mer- 
chant's Assistant. New Edition. London, 1868, pp. 159-160. 



522 OCEAN SHIPPING 

GRAIN, Wheat, 97 Imperial Quarters equal to 10 tons of Clean 
Hemp. 

Peas, Beans and Tares, to pay 10 per cent, more than the 

Freight of Wheat. 

■ Rye, to pay 7^ per cent. | 

Linseed, to pay 10 per cent. I Less than the 

Barley, to pay IS per cent. f Freight of Wheat 

Oats, to pay 22J/^ per cent. J 



Sowing Linseed, 12 Barrels, in Casks ) Equal to 1 ton 

, 24 Barrels, in Bulk j of Rhine Hemp 

WOOD, not to be considered as coming under the denomination of 
Stowage Goods. 

Deals, 120 pieces Petersburg Standard, equal to 3 Loads of 

Timber. 

Wainscot Logs, to pay % more than the Freight of Fir 

Timber, per load of SO cubic feet. Custom House Calliper 
Measure. 

Half Logs, for Broken Stowage, to pay % the Freight of 

Whole Logs. 

Round Masts, 33 feet Girt Measure, equal to 1 load of Fir 

Timber, of 50 feet. Custom House Calliper Measure. 

Staves (as Cargo), 1 Mille of Running Pipe equal to 20 loads 

of Fir Timber. 

Deal Ends (for Broken Stowage), to pay % Freight of Deals. 

Lathwood (for Broken Stowage), 1 Fathom of 4 feet equal 



to 1 load of Timber. 

MATS (from Archangel), to pay S per cent, less than the Freight 
of Hemp, for any Quantity not exceeding One-sixth Part, of 
the Ship's Cargo, reckoning 400 pieces of Double and 500 pieces 
of Single, to 1 ton. 

PITCH AND TAR, 100 barrels equal to 97 Quarters Wheat, Im- 
perial Measure. 

A modern tariff. — The pronounced difference between 

cuch a "tonnage scale" and a modern tariff is brought out 

by a comparison with the following which is a page from 

one of the tariffs issued by the Rates Division of the United 

States Shipping Board: 

UNITED KINGDOM TARIFF NO. 8-B. (Page 4.) 

Lead Billets — See Pig Lead. 

Leather, sole and scrap $2 . 50 100 lbs. 

Leather Finished, in rolls or bales 2 . 00 100 lbs, 

Leather Finished, in cases 2 . 00 100 lbs. 

or $1.00 cu. ft. 
Leather-board 1.50 100 lbs. 



RATE PRACTICE AND RATE CONTROL S23 

Liniments — See Drugs. 

Lithophone 1.00 lOOlbs. 

Liquors, bbls. and cases .65 cu. ft 

Lubricating OU ; l.OOlOOlbs. 

Lumber: 

Yellow Pine 42.00 1000 

superficial ft. 

Other Lumber and Timber— Heavy 1 .00 lOOlbs. 

Other Lumber and Timber— Light 1.22 lOOlbs. 

Logs 1 . 00 100 lbs. 

These rates apply on Timber and Logs when not 
exceeding two tons in weight. When exceeding two 
tons, special contract. 

The following are the varieties of lumber: 
Heavy: Ash (black, white). Beech, Birch, Cherry, Dog- 
wood, Elm (rock), Gum, Hickory, Blackberry, Lig- 
nimi-Vitae, Locust, Mahogany, Maple, Oak, Per- 
simmon, Walnut. 
Light: Basswood, Butternut, Cedar, Chestnut, Cotton- 
wood, Cypress, Elm (soft). Hemlock, Pine (white), 
Poplar, Spruce, Sycamore, Tupelo, Willow. 

Macaroni $1 . 50 100 lbs. 

Machinery — up to 2 tons 1.00 lOOlbs. 

or$0.50cu.ft. 

Magnetos 75 cu. ft. 

orl%ad. val. 

Malt, in bags 1 .25 lOOlbs. 

Maple Syrup l.OOlOOlbs. 

Match Blocks 1 .00 lOOlbs. 

Medicines — See Drugs. 

Methyl-Ethyl-Ketone 2.50 lOOlbs. 

Milk, powdered, in bbls 1 .00 lOOlbs. 

Mica, ground, in bbls 1 .00 lOOlbs. 

Mohair, in bales 2.50 lOOlbs. 

Monel Metal 1 .00 cu. ft. 

Motion Picture Fihns 1 . 00 cu. ft. 

or 1 % ad. val. 

Nails, wire 13.0022401b. 

Needles, machine 75 cu. ft. 

or 1% ad. val. 
Nuts and Bolts — See Bolts and Nuts. 

Ochre, in barrels 1-00 lOOlbs. 

Office Equipment 50 cu. ft. 

Oilcake Special 

Onions, in bags 1-25 lOOlbs. 

Optical Goods 75 cu. ft. 

or 1% ad. val. 

Oysters, in bbls 3.25 bbl. 

Pails, nested — See Tubs. 

Paint (non-inflammable) 65 cu. f t. 



524 OCEAN SHIPPING 

Paper, in cases 50 cu. ft. 

Paper, printing, in rolls or bales 1 . 25 100 lbs. 

Paralite Pitch 1.00 lOOlbs. 

Patent Medicines, see Drugs. 

Refrigerator Cargo — Special Stowage: The following additional 
rates are to be charged as minimums for such special stowage (in addi- 
tion to ordinary stowage rate) on all classes of cargo — except fruit: 

Frozen in a temperature of 32° or less Fahr. $1 . 50 additional 

Cold Storage . . .in a temperature of 33° to 40° " incL 1 . 25 additional 

Cool Air in a temperature of 46° and above 1 . 00 additional 

Heavy Lift Scale: The following rates to be added to the base rate 
for packages weighing in excess of 2 tons : EfEective on package freight, 
such as machinery, automobiles, and boxed goods, but does not apply to 
rough steel goods, such as structural material, steelplates, rails, etc., viz: 
Packages weighing over 2 tons and not exceeding 3 tons 20 cents cu. ft. 

or 40 cents 100 lbs. 
Packages weighing over 3 tons and not exceeding 4 tons 30 cents cu. ft. 

or 60 cents 100 lbs. 
Packages weighing over 4 tons and not exceeding 5 tons 40 cents cu. ft. 

or 80 cents 100 lbs. 
Packages weighing over 5 tons and not exceeding 6 tons 50 cents cu. ft. 

or $1.00 100 lbs. 
Packages weighing over 6 tons and not exceeding 7 tons 75 cents cu. ft. 

or $1.50 100 lbs. 
Packages weighing over 7 tons and not exceeding 10 tons $1.00 cu. ft. 

or $2.00 100 lbs. 

This sample page gives an idea how elaborate these 
tariffs are. It will be noted that no attempt at classification 
is made. The Shipping Board tariffs were straight com- 
modity tariffs. The Rates Division, prior to March i, 1920, 
when a new system of rate-making was devised, had issued 
the following tariffs : * 

North Atlantic to United Kingdom and Continent. 

South Atlantic to United Kingdom and Continent. 

Gulf to United Kingdom and Continent. 

Atlantic and Gulf to South America. 

North Atlantic and Gulf to Orient 

Pacific coast to Orient. 

North Atlantic to New Zealand and Australia. 

North Atlantic to India. 

North Atlantic to Africa, Turkey, Red Sea ports. 

Between Atlantic and Pacific ports. 

1 From Fourth Annual Report of the United States Shipping Board 
pp. 14S-146. . 



RATE PRACTICE AND RATE CONTROL 525 

Cotton : Atlantic and Gulf to United Kingdom and Continent. 
Lumber : North Atlantic, Gulf, and Pacific to United Kingdom 

and Continent. 
Coal : North Atlantic to European ports, Atlantic and Gulf to 

South America. 
Coal : Pacific to Far East. 
Nitrate : Chilean ports to North and South Atlantic. 



System abandoned. — "On March 1, 1920, these tariifs 
were abrogated. At that time, according to the Fourth 
Annual Report of the Shipping Board, the managing agency 
agreement No. 3 was adopted, the general terms of which 
provide for the operation of Shipping Board vessels under a 
profit-sharing plan, which changed the method of rate- 
making. Under this new arrangement, rates for vessels on 
general cargo services are made by conferences of Shipping 
Board managing agents. The conferences were organized 
under the supervision of the traffic department of the Divi- 
sion of Operations. 

"On full and bulk cargoes under this plan managing agents 
are given freedom of action in making rates subject to the 
prevailing market quotations. On the formation of the gen- 
eral cargo conferences the rates division ceased to issue 
tariffs. Four such general conferences have been established, 
namely. North Atlantic, with headquarters at New York; 
South Atlantic, with headquarters at Savannah ; Gulf, with 
headquarters at New Orleans; Pacific coast, with head- 
quarters at San Francisco. These general conferences have 
subcommittees which cover the other ports within their 
respective districts on general cargo services to practically 
all parts of the world. 

"As a result of these activities complete stabilization of 
rates in some trades and a large measure of stabilization in 
practically all the trades has followed. 

"The formation of the conferences after March 1, 1920, 



526 OCEAN SHIPPING 

changed the character of the work of the rate division. 
Although being reheved of keeping in actual touch with the 
local conditions which was necessary in order to quote on 
all kinds of cargoes and in varying quantities, the division 
has been called upon to perform duties of a different nature 
and of greatly added importance. The rules of the con- 
ferences require that any action on their part must be by 
unanimous vote ; failing, the questions in hand are referred 
to the Board for decision. Further, before making any 
drastic rate changes the conferences must also submit their 
recommendations for approval. A successful functioning 
of the conferences as a whole requires a relationship in 
rates and practices of the different districts, which is 
brought about by suggestions or instructions from the rates 
division. Criticism by the public of rates or practices when 
they are made are investigated and handled by this division 
with the assistance of the conferences when necessary." 

Freight classification. — Feeble attempts have been 
made at freight classification and various factors have com- 
bined to work in that direction. In the first place, the number 
of articles shipped is increasing rapidly, rendering simplicity 
through classification more necessary. Secondly, the en- 
trance of certain transcontinental railroads into ocean ship- 
ping has brought with it as a natural concomitant the ex- 
tention of railroad methods to ocean shipping. To a certain 
extent also, the example set by the German lines has had a 
bearing upon these improvements. 

The following paragraph, which is quoted from G. G. 
Huebner's Ocean Steamship Traffic Management (pp. 229- 
230), shows the extent to which freight classification is made 
the basis of ocean line rates: The New York and Cuba Mail 
Steamship Company (Ward Line), operating from New 
.York, and the Kerr Steamship Line and Wolvin Line oper- 



RATE PRACTICE AND RATE CONTROL 527 

ating from New Orleans to Mexican ports, provide for three 
numbered classes 1,2, 3, and rate certain additional articles 
at 1^ and double the first-class rates. The United Fruit 
Company in its services from New York and New Orleans 
to Pacific ports in Colombia, Ecuador, P^ru and Chile 
publishes tariffs which contain four numbered classes and 
additional ratings of double, four and five times the first- 
class rates for certain articles. The Panama Railroad 
Steamship Line in its tariffs covering traffic from New York 
to Colon and Cristobal names five numbered classes and also 
higher ratings of 1%, V/z and double first-class and double 
second-class rates for some items ; and in its tariffs covering 
traffic from New York to Pacific ports of Colombia, Ecua- 
dor, Peru and Chile, it provides four numbered classes and 
lists some articles at double and five times the first-class 
rates. The Gulf Foreign Freight Committee Lines, in- 
cluding the Atlantic Steamship Lines of the Southern Pa- 
cific Railroad, the Munson Line, United Steamship Com- 
pany and Occidental Steamship Company, classify traffic 
shipped from Key West, New Orleans and Galveston to 
Havana and Cuban out ports into the classes provided for 
in the Official Classification of the eastern trunk line rail- 
roads, i.e., six numbered classes, two rules (Rule 25 and 26) 
and in certain instances multiples of Class No. i. 

But even where an elaborate tariff existed it used to be 
the tendency to keep it jealously back of the counter in 
steamship offices; this does not refer to ships in the coast- 
wise trade. The Shipping Act of 1916 requires that com- 
mon carriers by water in interstate commerce shall file with 
the Board, open to public inspection, the maximum rate.* 

Rate control.-r-But also the steamship companies en- 
gaged in foreign trade are not free from rate control as 

1 See Section 18 of the United States Shipping Act, 1916. 



528 OCEAN SHIPPING 

appears from the following excerpt from the U. S. Shipping 
Act: 

Section 16. — That it shall be unlawful for any common 
carrier by water, or other person subject to this Act, either 
alone or in conjunction with any other person, directly or 
indirectly — 

"First. To make or give any undue or unreasonable pref- 
erence or advantage to any particular person, locality, or 
description of traffic in any respect whatsoever, or to sub- 
ject any particular person, locality, or description of traffic 
to any undue or unreasonable prejudice or disadvantage in 
any respect whatsoever. 

"Second. To allow any person to obtain transportation 
for property at less than the regular rates then established 
and enforced on the line of such carrier, by means of false 
billing, false classification, false weighing, false report of 
weight, or by any other unjust or unfair device or means. 

"Third. To induce, persuade, or otherwise influence any 
marine insurance company or underwriter, or agent thereof, 
not to give a competing carrier by water as favorable a rate 
of insurance on vessel or cargo, having due regard to the 
class of vessel or cargo, as is granted to such carrier or other 
person subject to this Act. 

"Section 17. That no common carrier by water in 
foreign commerce shall demand, charge, or collect any rate, 
fare, or charge which is unjustly discriminatory between 
shippers or ports, or unjustly prejudicial to exporters of the 
United States as compared with their foreign competitors. 
Whenever the board finds that any such rate, fare, or charge 
is demanded, charged, or collected it may alter the same to 
the extent necessary to correct such unjust discrimination 
or prejudice and make an order that the carrier shall dis- 



RATE PRACTICE AND RATE CONTROL 529 

continue demanding, charging, or collecting any such un- 
justly discriminatory or prejudicial rate, fare, or charge. 

"Every such carrier atid every other person subject to this 
Act shall establish, observe, and enforce just and reasonable 
regulations and practices relating to or connected with the 
receiving, handling, storing, or delivering of property. 
Whenever the board finds that any such regulation or prac- 
tice is unjust or unreasonable it may determine, prescribe, 
and order enforced a just and reasonable regulation or 
practice. 

Regulation of charter rates. — Rate regulation, natur- 
ally, is divided into two main phases : regulation of charter 
rates and regulation of berth rates. We quote the following 
explanation of charter rate regulation from the Third 
Annual Report of the United States Shipping Board, pp. 

2-3. ■ ; 

"During the war the question of control of tonnage and 
of rates was an important factor. The natural trend of 
the freight market since the signing of the armistice has 
rendered the control over rates less essential from the view- 
point of preventing them from becoming exorbitant. If 
anything, the situation has been reversed and the difficulty 
which the Qiartering Executive and the various depart- 
ments of the Shipping Board are now facing is to endeavor 
to maintain a satisfactory rate, rather than to enforce fur- 
ther reductions in rates. 

In view of the heavy ,cpmn(ittance and tonnage which 
the Government has been obligated to enter into during 
the war and which is now under the control of the Board, 
it is obviously requisite that freight rates should be kept 
Upon a paying level, as otherwise this vast tonnage would 
face the serious situation of having to operate at rock- 



530 OCEAN SHIPPING 

bottom rates under operating costs, in many instances, quad- 
ruple the cost before and during the early part of the war. 

"The Chartering Committee and Chartering Executive 
have from time to time in conjunction with the Division of 
Operations determined upon certain rates as 'fixed rates,' 
i.e., rates which were to be maintained and not exceeded, 
the idea being to create a stable condition in freights and 
obviate undue fluctuations. The fixed rates were in force 
only in the West Indies trade and South American trade. 
In all other trades there was a maximum rate in effect, 
and in all cases the maximum rate was of such a nature 
that it was high enough so that no fixtures were made to 
the maximum . rate in effect. 'Fixed rates' apply to the 
West Indies trade. Upon the removal of the rate control 
in this trade, outside fixtures will probably be made at 
rates lower than those quoted by the Shipping Board." 

The Shipping Board and rate control. — The last two 
Annual Reports of Shipping Board contain excellent 
paragraphs on the working of these regulatory features of 
the Shipping Act of 1916. We cite the following from the 
Third Annual Report (pp. 23-25) : 

The Division of Regulation shortly after the armistice 
was signed began to exercise its functions more fully than it 
had during the war period. The work of the division is 
essentially the regulation of rates and practices of water 
carriers in peace times and is properly divisible into four 
parts, namely, formal dockets, informal dockets, tariffs, 
and contracts and conferences, each of which will be sepa- 
rately considered. 

Cases on the formal docket embrace complaints submitted 
by shippers and other persons against carriers subject to 
the Board under authority of section 22 of the Shipping 
Act of 1916. During the entire period the Board has been 



RATE PRACTICE AND RATE CONTROL 531 

regulating the activities of water carriers only six formal 
complaints have been filed. 

Article 24 of the Rules of Practice in Proceedings under 
the shipping act provides that any letter or written memo- 
randum other than formal complaints in which a violation 
of the act is alleged will be regarded as an informal com- 
plaint and that the Board, through correspondence and 
informal conferences, will attempt to adjust the matter 
complained of. During the past year 63 of such informal 
complaints were filed. 

Common carriers by water in interstate commerce oper- 
ating on the high seas or the Great Lakes on regular routes 
from port to port are required by section 18 of the shipping 
act to file with the Board and keep open to public inspec- 
tion in the form and manner prescribed by the Board their 
maximum rates, fares, and charges, and are prohibited 
from demanding, charging, or collecting rates in excess 
of those so published except with the approval of the 
Board and after 10 days' notice unless the Board for good 
cause shown waives such notice. A file of these tariff 
publications is maintained by this division and kept open 
to the public at all times. The Shipping Act does not 
impose upon carriers engaged in foreign trade the duty 
of filing tariffs with the Board. 

The Board has issued tentative tariff regulations which 
have been used by carriers as a general guide in publishing 
their tariffs, but there is now before the Board a draft of 
permanent tariff regulations which will probably be promul- 
gated at an early date. 

The tariff files in the office of the division now contain 
1,150 freight tariffs and 1,175 supplements thereto, and 
282 passenger tariffs and 133 supplements thereto. 

Carriers and other persons, such as forwarders, amenable 



532 OCEAN SHIPPING 

to the jurisdiction of the Board are required by the pro- 
visions of section 15 of the Shipping Act to file copies or 
complete memoranda of all contracts, agreements, and un- 
derstandings in respect to rates, traffic, pooling of equip- 
ment, or any other working arrangement. 

The contracts and agreements above mentioned fall into 
two classes — the so-called steamship conferences, which 
are understandings among combinations of groups of steam- 
ship lines as to policies affecting operations, traffic, ports, 
etc. ; and in the past also involved the maintenance of sys- 
tems of deferred rebates which are now prohibited by 
law. These steamship conferences are supplemented by 
what are called conference agreements, these latter in- 
struments being contracts or agreements between parties 
subject to the original conference and based on that con- 
ference. It does not necessarily follow, however, that all 
of the parties to the conference are parties to the conference 
agreement. The other class of contracts includes those be- 
tween carriers subject to the Board outside of the confer- 
ences on the one hand and carriers and other persons sub- 
ject to the act — such as persons furnishing wharf and 
terminal facilities in connection with a common carrier by 
water — on the other hand. These contracts cover a variety 
of matters from the furnishing of wharfage to the allotment 
of ports. In order to facilitate the work of the office, 
concurrences in carrier's contracts and conferences already 
on file have been accepted in lieu of copies of the docu- 
ments themselves. A complete file of these conferences 
and contracts is maintained. 

Relations with the railroad administration. — ^The 
Board through its Division of Operations maintains close 
contact with the United States Railroad Administration, it 
being fully recognized on both sides that in the interest of 



RATE PRACTICE AND RATE CONTROL 533 

American foreign trade the fullest possible cooperation be- 
tween ocean and rail transportation facilities is essential. 

A committee composed of the Assistant Director of 
Traffic of the Railroad Administration and the Assistant 
Director of Operations of the Emergency Fleet Corpora- 
tion has been appointed to handle the many questions in- 
volving the relations between shipping and the railroads, 
the following being among the important subjects which 
have had consideration: 

(o) Through export bills of lading. 

(6) Export and import rail rates. 

(c) Allocation of Shipping Board tonnage to relieve 
temporary conjestion at certain ports. 

(d) Joint consideration of traffic available to support 
regular sailings from United States ports. 

(e) Assignment of Shipping Board vessels for railway 
operation. 

(/) Wage questions involving railway floating equipment 
and Shipping Board vessels. 

It is the earnest desire of the Board to have the closest 
possible unity between rail and ocean carriers, so that 
American shippers may have a continuous transportation 
system for world-wide foreign trade, whereby goods can be 
shipped from a point in the United States to any place 
in the world as conveniently and with as little obstruction as 
to one of our own cities. 

The following is taken from the Fourth Annual Report 
(pp. 61-65) : 

Rate function of Division of Regulation and Division 
of Operation distinguished. — Some confusion or mis- 
understanding prevails as to the rate regulation work 
carried out by the Division of Regulation and the rate- 
making or rate-controlling work performed by the Division 



534 . OCEAN SHIPPING 

of Operation. It is important, therefore to clarify these 
jurisdictional differences. 

The Division of Regulation deals exclusively with com- 
mon carriers by water in the domestic and foreign commerce 
of the United States. Its functions are quasi- judicial. 
The Shipping Act leaves with the common carriers the 
right to initiate rates, which, however, in respect of in- 
terstate carriers must be published, posted, and filed in 
accordance with regulations prescribed by the Shipping 
Board. If shippers feel that any rates so filed are unduly 
discriminatory, excessive, unreasonable, or otherwise in vio- 
lation of the shipping act, 1916, they may file with the Board 
under section 22 of the act a sworn complaint setting forth 
their grievance and praying for corrective action by the 
Board and reparation for damages sustained. After all 
necessary pleadings are filed the division holds an open 
hearing at which both sides are allowed to present evidence 
and cross-examine witnesses. If upon the facts proved it 
appears that the rates are unduly discriminatory or un- 
reasonable, the carrier is directed by formal order of the 
Board to adjust its rates in such a manner as to correct the 
evil found to exist. It will thus be seen that the division in 
no sense can be said to be making rates, but is merely acting 
as a judge of the rates made directly by the carriers. 

While the Division of Operations was engaged exten- 
sively in operating vessels directly, it maintained a rate- 
making section, the function of which was to actually de- 
termine and make the rate which should be charged shippers. 
Since the Shipping Board vessels have been operated by 
private interests, the Division of Operations, through its 
agreement with the operators and its power to allocate 
vessels, maintains a large measute of control over the actual 



RATE PRACTICE AND RATE CONTROL 535 

rates to be exacted by the operators. The operators en- 
gaged in a particular trade organize what may be termed 
a steamship confefence, the chairman of which is a rep- 
resentative of the Division of Operations. They meet at 
stated intervals and fix the rates to be paid by the shippers. 
The rates so fixed are, of course, liable to attack by ship- 
pers on the ground of unreasonableness or undue discrim- 
ination, in which event the Division of Regulation would 
pass upon them as indicated in the preceding paragraph. 
It is therefore manifest that the rate functions of the 
Division of Regulation and the Division of Operations are 
widely different. 

Carriers' Conferences and Contracts. — One of the prin- 
cipal activities of the Division of Regulation during the 
past year has been the handling of carriers' conferences, 
contracts, agreements, and understandings in respect of 
rates, traffic, pooling of equipment, or traffic and other 
working arrangements filed under the provisions of section 
15 of the shipping act, 1916. Owing to the constantly 
changing conditions in the shipping world, this branch of 
the work of the Division of Regulation is assuming large 
proportions. 

At the end of the fiscal year there were on file in this 
office 33 conferences. These conferences are, in the main, 
organizations of steamship companies designed primarily 
to cooperate in such manner as to prevent destructive com- 
petition, under which function various subconferences, or, 
as designated in certain regions, trade conference groups. 
In one instance, Gulf Shipping Conference (Inc.), there 
are 14 subsidiary conferences or trade groups. .Most of 
these conferences hold weekly meetings, at which matters 
of vitaJ interest to the particular trade are discussed and 



536 OCEAN SHIPPING 

definite action taken. The filing and analyzing of the 
minutes, tariffs, and other conference papers in order to 
determine whether or not they are in contravention of the 
existing law is a task which is not only difficult but one 
which must be kept strictly up to date in order to be effec- 
tive. It should be remembered that a large percentage of 
the new conferences being filed with the Board are a direct 
result of the Shipping Boards' participation in the coast- 
wise and foreign trade of the United States. The carriers 
forming the new conferences are all American, although 
they operate on the same plan as the foreign line confer- 
ences which have been established for many years. 

The carriers' contracts which were filed prior to and 
during the war and which lay practically dormant in the 
files until the beginning of last year have all been brought 
tip to date. Many of the contracts were found to be can- 
celed or superseded by new ones. There are at the present 
time 194 contracts on file. 

Tariffs checked and analyzed. — The checking, an- 
alyzing, and filing of , tariffs submitted- by the interstate 
water carriers subject to the Board constitutes a large part 
of the work of the division. During the year 1,452 new 
tariffs were received, checked, and filed. These tariffs 
show rates on the Atlantic, the Gulf, and the Pacific coasts, 
as well as the Great Lakes ; also to Porto Rico, Canal Zone, 
Hawaii, Alaska, and the Philippines. 

A duplicate tariff file is maintained in the division. This 
file is kept up to date and is open to public inspection at 
any time. This privilege is being taken advantage of by 
representatives of various shippers and persons directly in- 
terested in waterborne commerce. 

Regulations for the publication, posting, and filing of 



RATE PRACTICE AND RATE CONTROL S37 

tariifs with the Board were compiled and issued in a 
pamphlet entitled "Tariflf Circular No. 1," effective April 
30, 1920. Since that date, common carriers by water in 
interstate commerce subject to the jurisdiction of the 
Board have been required to file their tariffs in accordance 
with said regulations. 

At the present time 99 interstate water carriers are filing 
tariffs, which represents an increase of 40 over those filing 
during the previous year. In addition, 10 tariff agencies 
are submitting tariffs. 

Charter filing regulation. — The latest development in 
the matter of rate control is the so-called Charter Filing 
Regulation which went into effect October 1, 1920. Basing 
its action on authority granted in section 19 of the Mer- 
chant Marine Act of 1920, the Shipping Board requires that 
all charters of American and foreign privately owned ves- 
sels must be submitted to a chartering executive of the 
Board. The text of the announcement reads in part as 
follows : 

"Two certified copies of each charter made on all Ship- 
ping Board vessels, privately owned American and foreign 
vessels are to be filed with the chartering executive at New 
York, at which time the chartering executive will issue at 
once a charter filing certificate in duplicate, said certificate 
showing that vessel is in order for clearance, and dupli- 
cate of this certificate is to be surrendered to the collector 
at time vessel applies for clearance." 

Where there is insufficient time for the filing of the char- 
ter, proceeds the communication, a letter or telegram to the 
chartering executive "giving details pertaining to said 
charter" will suffice. In such cases an order for clearance 
will be issued on the understanding that two certified copies 



538 OCEAN SHIPPING 

of the charter will be forwarded in due course. General 
cargo and passenger vessels, those in ballast and those 
carrying cargo for owners' account, are not Subject to the 
new regulation. 

The avowed purpose of the order is to secure data which 
will enable an exact compilation of figures showing the 
portion of our commerce carried in American and in foreign 
bottoms respectively. Whether the suspicion aroused and 
the interference with private business caused by the order 
will lead to its speedy repeal remains to be seen. 

In conclusion we would say, that no other country has 
ever attempted so ambitious a plan of rate control and 
shipping supervision, just as no other country can boast 
of a Sherman Anti-trust law. Many years will go by, before 
we as a nation have made up our minds about this weighty 
problem of government control of business. But signs mul- 
tiply, that a more liberal era is dawning upon us. 



REFERENCES 

Annin, R. E. Ocean Shipping. Chaps. XIX and XX. (1920). 

HuEBNER, G. G. Ocean Steamship Traffic Management. Part III. 
(1920). 

Johnson and Huebneh. Principles of Ocean Transportation. 
Chap. XXII. (1919). 

Johnson and Van Metre. Principles of Railroad Transportation. 
Chaps. XXI and XXII. (1919.) 

KiRKALDV, A. W. British Shipping, book II. (1914). 

United States Shipping Board. Ocean Rates and Terminal Charges. 
Report by Emory R. Johnson. (1919.) 

Department of Agriculture, Bureau of Statistics. Ocean Freight 
Rates and Conditions Affecting Them. Report by Frank An- 
drews. (1907.) 

Department of Commerce. Bureau of Foreign and Domestic 
Commerce. Trans-Pacific Shipping. (Miscellaneous Series No. 
72, 1913.) 



RATE PRACTICE AND RATE CONTROL S39 

House Committee on the Merchant Marine and Fisheries. Hear- 
ings on the Bill Creating a Shipping Board, a Naval Auxiliary, 
and a Merchant Marine. (1916.) 

Senate Committee on Commerce. Hearings on Regulation of 
Ocean Freight Rates, Requisition of Vessels, and Increasing the 
Power of the Shipping Board. (1918.) 

Senate Committee on Commerce. Hearings on Establishment of 
an American Merchant Marine, (1919-20.) 



CHAPTER XXVII 
THE FINANCES OF SHIPPING COMPANIES 

Unsteady character of steamship profits. — ^The cen- 
tral fact of shipping finances is that the earnings of 
shipping companies are unsteady in the highest degree. 
This is only natural in view of the risk attached to the 
shipping business. The shipowner feels the pangs of adver- 
sities which affect the many industries and trades served by 
him. When the shipowner has good times, they are very 
good; but his bad times are equally bad. And these ex- 
tremes follow each other in abrupt succession. Only two 
years ago ocean rates were riding the crest of a tidal wave 
of war time prosperity. To-day, 5,000,000 tons of shipping 
are swinging idly at anchor in ports and harbors through- 
out the world. Les extremes se touchent and the ship- 
owner must make hay while the sun shines. 

The tramp owner feels the effect of this situation more 
keenly than the liner company ; for charter rates, as we have 
seen, fluctuate considerably more than liner rates, the latter 
being more or less steadied by rate agreements. On the 
other hand, the tramp has the advantage of being able to 
withdraw from operation when business becomes too dull. 
The liner must "carry on," sometimes even at a loss, unless 
good will acquired with much effort and at great expense 
is to be sacrificed. 

On pages 541-542 are two tables from "Fairplay" of 
January, 1920, which give the earnings of a selected group 
of cargo boats over a period of 16 years and the earnings of 
a selected group of, passenger lines for a period of 14 years : 

540 



THE FINANCES OF SHIPPING COMPANIES 



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THE FINANCES OF SHIPPING COMPANIES 543 

We note that in the case of the cargo boats, profits 
fluctuate from about £640,000 for 393 vessels or £1,632 
per vessel (or about lis. per gross ton) in a poor year 
to almost £11,000,000 for 499 vessels or £21,977 per ves- 
sel (or about £5 lis. per gross ton) in an exceptionally 
good year. That means a tenfold increase. To be sure, 
the war exaggerated the fluctuation, but shipping is a world- 
wide business and it would be hard to find any period of 
fourteen or sixteen years which has not been disturbed by 
some war in some part of the world. It should be mentioned 
here that some of the cargo boats included in these statistics 
operate at least at times on a time schedule so that the table 
does not refer to tramps only. 

If we compare the dividends paid by the cargo boat com- 
panies during the 14 years 1906-1919 and those paid by the 
passenger lines during the same period, we find the fol- 
lowing: The range in the case of the cargo boats extends 
all the way from 1.89 per cent to 19.24 per cent or again 
a tenfold increase. Liner rates fluctuate less and the line 
business requires a more conservative financial policy. The 
lowest dividend rate during the period was 4.10 per cent 
and the highest 14.09. Fluctuation far less violent than that 
of the cargo boat earnings. It is interesting to note that in 
spite of this difference in the relative stability of the divi- 
dend rate, the average for the periods under consideration 
is just about the same for the two classes of shipping con- 
cerns namely 9.15 and 9.03 per cent respectively. This 
refers to return and capital invested. If however, we com- 
pare the return on the basis of net tons a very different 
picture appears. 

The Sub-Committee of the Imperial Defense Com- 
mittee by which the war risk insurance scheme was 
framed, accepted, after examination by the Board of 
Trade, the following estimates of the annual earnings 



544 OCEAN SHIPPING 

of British shipping in the ten years ending in the year 191 1 :' 

Liners {& per gross ton, l\i 4 per net ton 

General Traders £Z per D W ton, £7 IC per net ton 

Effect of fluctuating earnings on sales price of ves- 
sel. — The extreme fluctuations of steamship earnings 
are reflected in the sale price of steamers. The chart on 
page 545 gives the average sale price of a typical British 
steamer from 1898 to 1920: 

The diagram shows that the price rose from slightly 
less than £50,000 in 1898 to over i60,000 as a result of 
the extraordinary demand created by the Boer war. 
This high price of tonnage stimulated the building in- 
dustry to such an extent that an over-supply of ton- 
nage resulted. This caused a depression which lasted 
until 1910 and was not fully overcome until the war 
shortage drove the price of the steamer up to nearly 
£190,000 in 1916 and to over £230,000 in 1919. "Fairplay," 
in January, 1920, expressed the belief that the present price 
is higher than is warranted by the probable movement of 
freight rates during the next few years. The result of the 
high price of tonnage during 1918 and 1919 was the same as 
that noticed in the case of the Boer War, namely an enor- 
mous expansion of building activity. It was estimated that 
at the beginning of 1920, ships of no less than 12,000,000 
deadweight tons carrying capacity were under construc- 
tion, which, figuring an average of three voyages a year, 
would add to the world's yearly carrying capacity the 
immense figure of 36,000,000 tons. The inevitable result 

1 From Report by Sir Norman Hill, Secretary Liverpool Steam- 
ship Owners' Association, on The Shipping of the United Kingdom 
Employed in the Ocean Overseas Trade and the Effect of th? War 
Thereon. 

* Marine Review, June, 1920. 



THE FINANCES OF SHIPPING COMPANIES 



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546 OCEAN SHIPPING 

was a deflation of tonnage values almost as drastic as the 
preceding inflation. 

Book values and competition. — One result of this ex- 
traordinary advance in the price of ships is a wide dis- 
crepancy in the competitive strength of older and 
younger shipping companies. Companies which ac- 
quired their tonnage at the time when the price of ships 
had reached rock bottom, share in the enormous profits 
and, in some cases, can "write off" their entire fleet in 
one year. On the other hand, new companies or com- 
panies operating ships bought at high prices, are not 
in the same favorable position. It is this fact which is 
frequently pointed out in the discussions of the ability 
or lack of ability on the part of American steamship 
companies to compete with the European, particularly 
British companies. 

Relation of stocks and bonds in shipping finance. — 
The uncertainty of future earnings renders conservative 
financing imperative. The ratio of stocks to bonds is, 
therefore, very different in the case of steamship com- 
panies and railroad companies. The following table 
gives a number of interesting facts concerning the In- 
ternational Mercantile Marine Company and a score of 
leading British steamship lines, showing that the total 
of outstanding debentures is less than half the paid-up 
capital and this represents a relatively small percentage of 
the book value of the fleet plus other investments. In short, 
British shipping companies tend to be under-capitalized 
and avoid funded indebtedness.. (In this connection ' it 
should be remembered that the English debenture resembles 
more closely our mortgage bond than our debenture.) 



THE FINANCES OP SHIPPING COMPANIES S47 



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THE FINANCES OF SHIPPING COMPANIES 549 

In all cases the debenture debt is far below the book 
value of the fleet. Another interesting fact revealed by 
this table is that in some instances the fleet does not 
represent the major portion of the company's assets, 
as notably with the Cunard Steamship Company, the 
Leyland Line, the Oceanic Steam Navigation Company. 

Methods of acquiring capital. — We now turn to the 
question of how steamship companies acquire the nec- 
essary capital. To be sure, no definite rule can be 
laid down, but at this juncture in the marine history 
of the United States where the country is faced with 
the problem of financing the sales of approximately 
10,000,000 tons, a brief analysis of financial methods by 
which Great Britain has succeeded in the past should 
prove both timely and valuable. We have mentioned 
before that most of the tramp tonnage of Great Britain is 
financed by the issue of 64 shares per vessel, the majority of 
which is held by the vessel owner while the remainder is sold 
to the general, but principally the exporting public. The 
usual system is one which assures great incomes to the 
managing owners by granting them in payment of their 
managerial services 2 per cent of the gross trade earnings. 
This, added to the dividend declared on the majority shares 
— 33 out of 64 — which are held by the managing owners, 
guarantees a comfortable return if not a large one. On 
the other hand, the minority stockholder has to be satis- 
fied with more meager returns. But since the minority 
Stock is usually held by exporting manufacturers and 
shipping merchants who are vitally interested in low 
shipping rates, the minority is satisfied with these mea- 
ger returns on their shipping investments, feeling com- 
pensated because of expanded overseas business due 
to low freight rates. Frequently the contracts with the 



SSO OCEAN SHIPPING 

ship's managers and stockholders contain a clause which 
forbids that insurance money for loss of vessel be dis- 
tributed to shareholders, making it compulsory on the 
other hand that this be reinvested in a new vessel as 
soon as the opportunity offers. 

Wide distribution of British steamship securities hold- 
ings. — British passenger liners, on the other hand, have 
grown largely by reinvested earnings in additional 
ships. Their shares are widely scattered, as is indicated 
by the fact that five of the leading British shipping com- 
panies have over 44,000 shareholders with an average 
holding of only $2,500 each. 

This wide distribution is aided by the low denomina- 
tion of British shipping shares which is usually one pound 
sterling. The interest in marine insurance is so great that 
when new securities are offered for public subscription 
they are frequently oversubscribed to the extent that the 
promoters are enabled to purchase more tonnage than 
previously contemplated. "In connection with the re- 
cent public issue of 1,000,000 shares of one of the newer 
English shipping companies, no less than 8,900 letters 
of regret over inability to allot the amount applied for 
had to be sent by the syndicate manager." 

American methods. — It should be noted here that the 
American method of selling shipping bonds and shares 
direct to the public through the underwriter, has only 
recently been adopted in England. 

As far as ship mortgage bonds are concerned, English 
marine practice has evolved numerous channels for their 
distribution. They were described by Mr. John E. 
Barber of Harris Forbes and Company, in an address de- 



THE FINANCES OF SHIPPING COMPANIES SSI 

livered at the National Foreign Trade Convention held 
in San Francisco in April, 1920:' 

"A substantial amount of English ship financing is done through 
brokers or banks specializing in shipping mortgages. Such mortgage 
loans are distributed privately in varying amounts. There are also 
several mortgage concerns vtrhich lend money against ships at rates of 
interest usually about 1 per cent above the bank rate. Such firms 
accept bills for the mortgage loan, a certain proportion of which fall 
due every six months. 

Investment trusts specializing in shipping stocks and mortgages 
have provided another important method of financing English ship- 
ping enterprise. The debenture bonds of institutions like the British 
Maritime Trust, Ltd., and the British Steamship Investment Trust, 
issued against a diversified list of shipping securities enjoy a broad 
market and are highly regarded by conservative investors. 

Moreover, new institutions are constantly being organized to aid 
British shipping, The Mercantile Marine Finance Corporation, Ltd., 
recently incorporated with a capital of $S,000,000, represents practi- 
cally the first company organized exclusively for financing ship build- 
ing, particularly the smaller shipbuilders who are unable to float 
public issues. Also, one of the English oil companies has just created 
a subsidiary known as "Tankers, Inc.," with an initial capital of 
$7,500,000 for the exclusive purpose of financing the purchase and 
construction of tankers, which are subsequently to be chartered to 
the parent company. 

The issue of shipping bonds and shares direct to the public through 
underwriters after tlie American fashion has been adopted only 
recently in England, because of the difficulties experienced by some 
of the newer shipping companies in financing their needs through the 
channels described above. Securities in small denominations, usually 
il sterling, are offered for public subscription, and such is the revival 
of interest in marine investments that huge over-subscriptions often 
result, enabling the promoters of shipping companies to purchase 
more tonnage than previously contemplated." 

European practice. — Also the experience of Holland 
and Norway is valuable: 

"Holland originated the Marine Mortgage Bank for lending money 

' See Nautical Gazette, May 22, 1920, p. 774, 



SS2 OCEAN SHIPPING 

to shipbuilders and shipowners exclusively against ships. This type 
of institution has since been copied in Germany, Norway, Sweden, 
Denmark, and Belgium. Debenture bonds secured by mortgage 
loans restricted by law to 60 per cent of the estimated value of the 
ships pledged, are distributed to investors. The debenture issues 
of twelve marine mortgage banks bearing interest rates varying 
from 4J4 per cent to 6 per cent are freely traded in on the Amster- 
dam Stock Exchange. Although introduced onl.y twenty years ago, 
these banks have met with astonishing success and at present have 
loans outstanding on ship mortgages aggregating $30,000,000. 

"In Norway, ship loans are treated as commercial loans in this 
country, and there is no class of banks specializing in lending 
against ships as security. Such loans are usually made for a period 
of six nionths, occasionally a year, and are renewable. They are 
protected by an assignment of part of the prepaid freights. Although 
made by the bank, directors and outside capitalists often participate 
in the underwriting. Marine Equipment bonds, as we know them, 
are not issued in Norway. A newly organized shipping company 
may issue its shares directly to the public, or through an under- 
writing bank. These shares are in bearer form and have dividend 
warrants attached, which, like coupons, are cut off as the divi- 
dends become payable. Such shares are extremely popular, and it 
has been possible to distribute throughout Norway the shares of 
the smaller companies, and even shares in individual ships which 
are partly owned and entirely managed by the masters, mates, and 
engineers who operate them. 

"The experience of foreign maritime countries demonstrates that 
it is possible to popularize shipping investment irrespective of the 
size of the borrower or his sphere of activity." 



Reforming the ship mortgage law.— In the United 
States, the sale of vessel mortgage bonds is at present 
handicapped because the law places supply and repair 
bill liens. Chairman Greene of the House Merchant 
Marine and Fisheries Committee, in order to relieve the 
situation, has proposed a bill the most essential features 
of which are as follows: 



THE FINANCES OF SHIPPING COMPANIES SS3 

(1) No mortgage to be valid unless securing a 
bona fide indebtedness; 

(2) Every mortgage to be recorded with the Col- 
lector of Customs of the home port of the ship; 

(3) The mortgagor to disclose to the mortgagee all 
obligations against the vessel to be mortgaged, 
and not to incur any contractual liens without 
the consent of the owner of the mortgage other 
than wages of crew and stevedores, general av- 
erage claims and salvage; 

(4) Jurisdiction to be vested in the United States 
District Courts to impose the penalties pro- 
vided and to foreclose such mortgage ; 

(5) Liens for repair to be subordinate to mortgage. 
In general, all claims under contracts to be sub- 
ordinate to the mortgage, but claims under torts 
to be superior to it; 

(6) The mortgage may be subordinated to any lien 
by agreement with the owner of the mortgage. 

These provisions are of interest, although, as is ex- 
plained in Chapter XXX, not all of them were incor- 
porated in the Merchant Marine Act, 1920. 

The experience of Great Lakes bankers. — In judg- 
ing this proposal, the experience of the bankers of the 
Great Lakes region who have handled more than 
$100,000,000 worth of vessel securities constitutes an im- 
portant precedent and will serve as a valuable example. 
The Marine Review of November, 1919, explains the. 
system as follows: 

"The development of the Great Lakes plan has been 
a process of growth over a period of 20 years. It is not 
a fixed formula, but rather a composite practice existing 



554 OCEAN SHIPPING 

in the provisions of a host of mortgage deeds of trust, 
some of which differ in detail, but all of which are based 
upon the same accepted underlying principles of safety. 

"The plan includes numerous provisions for raising a 
solid barrier against risks in ship financing, but the fol- 
lowing salient features, found in most mortgages in one 
form or another, are recognized as the chief safeguards 
under the Great Lakes method of financing: 

"First: The mortgage covers but one^half of the 
value of the property. 

"Second : Insurance to the full insurable value of the 
property is carried by the. owner and controlled by the 
trustee. 

"Third: When the mortgage is placed, the owner 
must guarantee the ship to be completely free from 
mechanics liens or other encumbrances. 

"Fourth: The company agrees not to declare any 
dividends on common stock until bond interest is pro- 
vided for out of earnings. 

"Fifth : Provision is made for supplying of periodical 
reports on business by th'e company" to the trustee. 

"Sixth: A limit either as to amount or as to per- 
centage of the mortgage, is fixed for supply and repair 
indebtedness, running above which constitutes breach of 
mortgage and is cause for foreclosure. 

"Financial and legal authorities in the Great Lakes 
region hold that these fundamental safeguards remove 
the ' moral hazard surrounding marine risks and place 
ship mortgage securitiefs, even under the present law, 
upon a plane comparable to the best types of issues 
ashore." • 

However, it may be said that important differences 
exist between Great Lakes shipping and ocean shipping 



THE FINANCES OF SHIPPING COMPANIES 



SSS 



which arise out of the limited expanse of the Lakes and 
the homogeneous nature of business interests in that 
inland section as compared with the world-wide ocean 
shipping. Nevertheless, the lesson taught by the Great 
Lakes success should not be ignored. 

Income of American shipping.— The following diagram 
prepared by the Bureau of Census* shows the income of 
vessels under American registry for 1906 and 1916, 
divided on a geographical basis and upon the basis of 
the source from which the income is derived, whether 
freight, passenger or other business: ; . _ 

INCOME OF VESSELS, BY DIVISIONS AND BY 
OCCUPATION : 1916 AND 1906 



ATLANTIC COAST AND OULF OF MEXICO 



IMM 



7//////////////////////////////////////////////////////^^^ 

7/mMmmm^.»mm 




^•nc (M.V 



I "Transportation by Water, 1916," Washington, 1920, p. S8. 



556 OCEAN SHIPPING 



REFERENCES 



Crammond, E. The British Shipping Industry. (1917.) 
Hurley, E. N. The New Merchant Marine, Chap. XIV. (1920.) 
Johnson and Huebner. Principles of Ocean Transportation. Chap. 

XVIII. (1919.) 
National Foreign Trade Council. Ocean Shipping. 2d. eA (House 

Doc. No. 2112, 64 Cong., 2 Sess., 1917.) 
United States. Bureau of the Census. Transportation by Water in 

1916. (1920.) 
The Federal Reserve Board in its Monthly Bulletin of April, 1921, 
published a remarkable article on Shipping Finances in their 
relation to the balance of trade. This constitutes one of the 
most valuable contributions on the subject. Unfortunately, this 
valuable material could not be utilized in this chapter. 



PART IX 
AMERICA'S MERCHANT MARINE 



557 



CHAPTER XXVIII 

HISTORY OF THE AMERICAN MERCHANT MARINE AND 
RECENT LEGISLATION 

Early Growth. — The history of the American Mer- 
chant Marine has been often told, and we need only to 
refresh our memories on some of the chief incidents 
which have a bearing on present problems. 

When the nation was born, the merchant marine was 
in a sorry plight. Promising developments of the 
colonial period had been checked by the Revolutionary 
struggle, and in 1789 the entire fleet registered for foreign 
commerce amounted to only 123,893 tons. 

The tariff legislation of the period favored our ships 
by a reduction of duties by 10 per cent for all goods 
imported in American vessels. The Napoleonic 
struggle in Europe then impending, and soon to break 
out and engage the energies of Europe for the next 
decade and a half, stimulated our shipping. Tonnage 
grew to 667,107 in 1800. Our' own trade had been 
handled alniost entirely in our own vessels, and we ab- 
sorbed a large carrying trade from the West Indies 
to Europe, and a considerable transshipment trade arose. 

Development of shipping checked. — Things went well 
until combatants in Europe through their blockade be- 
gan to interfere with our shipping. Vainly we pro- 
tested. Our protests unheeded, we were led into the 
War of 1812 of glorious memories and vague and un- 
certain results. When peace settled upon the world 
we were confident of the strength of our position. The 
preferential treatment of our shipping was abandoned 

SS9 



560 OCEAN SHIPPING 

through the legislation of 1828, and commercial treaties 
removed all special advantages we had enjoyed. 

Our merchant marine developed more slowly. But 
'two factors retarded the loss to the American Mer- 
chant Marine. One was the opening in 1824 of the 
Erie Canal, which gave to New York its prominence as 
a. shipping center. The other factor was the cession of 
Florida by Spain in 1819, which substituted a fresh 
timber supply — mostly oak — for the rapidly diminishing 
supply of the northern central regions.' 

Conditions of competition were changing. Steam 
was beginning to be applied as motive power. Great 
Britain encouraged the building of steamships by a 
system of subsidies. The Cunard Line owes its be- 
ginning to this policy. To some extent the United 
States met this competition, and in the forties several 
steamship lines were subsidized. In 1847 the Govern- 
ment made its contract with the Collins Line, a worthy 
rival of the Cunard. 

The clipper ship era and its subsequent decline.— For 
a few years beginning with 1843 when the first clipper 
ship — The Rainbow — was designed, there was a splendid 
development of American shipping. In 1850, the total, 
tonnage of merchant shipping, including steam vessels, 
in the United States was 3,535,454 tons. In the same 
year. Great Britain had a merchant marine totalling 
in the home and foreign trade, 3,565,133 net tons' 
From 1846-1857 American shipping engaged in foreign 
trade grew from 943,307 tons to 2,268,196 tons. It is 

' See America's Merchant Marine, Banker's Trust Company, pp. 11 
and 12. 
* See America's Merchant Marine. Banker's Trust Company, p. 13. 



HISTORY OF AMERICAN MERCHANT MARINE S61 

of this period that Wiliam Brown Meloney in The 
Heritage of Tyre ' writes : "The United States was the mis- 
tress of the seas. Ship for ship — chpper or ordinary 
merchantman — the United States dominated the com- 
merce of the world ; but as 1857 was the evening of the 
clippers it was the afternoon of our merchant marine — 
foreign commerce." Shipbuilding reached its climax in 
1851, when no less than 583,450 tons of shipping were 
launched from American yards. In the next few years 
and even before the Civil War there was a marked 
falling off. This followed the withdrawal of the sub- 
sidies and encouragement which the government had 
given to shipping. The Civil War merely accelerated 
the decline of American shipping, which had begun six 
years earlier. Confederate cruisers between 1861 and 
1865 burned or appropriated 110,000 tons of American 
shipping, and drove 751,595 under foreign (mainly 
British) colors. Thus the seagoing fleet, which in 1861 
amounted to 2,496,894 tons and carried 65.2 per cent of 
our exports and imports', had shrunk in 1866 to 1,387,756 
tons, which carried only 32.3 per cent of the foreign 
trade. 

The loss was steady until 1898, when a minimum ton- 
nage of 726,213 was reached. As to carrying American 
trade in American ships, the lowest point was reached 
in 1900, when only 8.2 per cent of our foreign trade was 
carried in American ships. 

The decline in American shipping was co-incident 
with the rise of iron and steel ships. The supremacy 
of American shipping of clipper ship days was largely 
based upon the abundance of raw material and skill 
in ship construction. With the appearance of iron mate- 
■rials, this supremacy passed to Great Britain. For 

1 P. 89. 



S62 OCEAN SHIPPING 

many years British shipyards enjoyed not only this ad- 
vantage, but also a lower wage rate, and large scale pro- 
duction. 

Vain efforts to revive American ocean shipping. — 
During the thirty years before the war the question 
of stimulating the merchant marine was constantly be- 
fore the public, but little was accomplished. The only 
positive legislation was the Postal Aid Act of 1891, un- 
der which arrangements were made with American lines 
for the carrying of mails, at rates somewhat higher than 
contract rates. 

In recent years, even before the war wrought a com- 
plete change, conditions had taken a turn for the better, 
and many of the adverse factors which had prevented 
the growth of an American merchant marine had either 
been eliminated or else converted into favorable in- 
fluences. 

Awakening interest. — Thus the interest in the internal 
development of the country is no longer all-absorbing, 
and no longer entirely precludes the interest in the over- 
seas trade. The large amounts of capital which have 
been invested in American shipping by such firms as 
the Standard Oil Company, United Fruit Company and 
the United States Steel Products Company show new 
needs and a new trend of thought. 

The development of our steel industry has brought 
the price of ship plates somewhat below the figure 
quoted by British manufacturers. This benefits especial- 
ly the manufacturers of standard tramp steamers. Fur- 
thermore, new railroad lines have been constructed 
which act as feeders of our shipping industry. This is 
especially true of coal-carrying railroads. Virginia 



HISTORY OF AMERICAN MERCHANT MARINE S63 

steam coal of excellent quality can now be delivered at 
low cost at Atlantic seaports, such as Norfolk, Newport 
News and Charleston. This coal is able to compete with 
the Australian, Japanese and Welsh coal which used 
to control the Far Eastern market and tends to reduce 
the return freight rates on imported nitrates, as well as 
on copper, tin, iron ores and similar commodities. The 
trade also invaded Europe and seems to be getting a firm 
foothold there. 

The first evidence of a desire on the part of Congress to 
encourage American shipping on the high seas was the 
insertion, in the Panama Canal Act of 1912, of a clause 
authorizing the naturalization or admission to American 
registry and flag of foreign-built vessels under five years 
of age, and granting the free entry of materials used in 
the construction and equipment of ships. This clause 
reversed the national policy of a hundred years. In 
the face of this invitation, two years went by without 
a single foreign-built ship seeking the American flag. 
No better evidence could be desired of the higher cost 
of operation imposed by American policy than in this 
fact. 

The willingness of Congress to encourage shipping 
was further proved by the inclusion in the present 
tarifif act of a clause allowing a discount of S per 
cent in the customs duties on goods imported in Amer- 
ican bottoms. We are reminded of the early policy 
of 1789 which had produced such marvelous results, 
but administrative interpretation and the Supreme 
Court's decision declaring it unconstitutional made it non- 
operative, and now the new law has superseded it. 

New conditions caused by the European war. — The 
European War created new conditions and oppor- 



564 OCEAN SHIPPING 

tunities which Congress had to take into account. Thus, 
on August 18, 1914, an act was passed which eliminated 
the five-year age limit and also the requirement of 
"fitness to carry dry and perishable cargo"; in other 
words, removed all the modifications of the Panama 
Canal clause admitting foreign-built vessels to Amer- 
ican registry Thus the doors were opened wider still. 
Ships entering American registry were allowed to retain 
foreign officers, which reversed the policy that the Amer- 
ican flag could fly over no ships not officered by Ameri- 
cans. As a result some hundred and seventy-five to two 
hundred steam and sail vessels have come under the 
American flag. A large percentage of the boats was 
already employed in American trade, most of them the 
property of American citizens before their admission to 
American registry. The motive of shipowners in trans- 
ferring their ships to American registry at the outset of 
the European war was to secure the protection of the 
flag of the most powerful neutral. The flag and the 
more favorable marine insurance rates constituted a 
generous subsidy to these ships for the time being. 

The Government also established a War Risk Bureau 
to insure American vessels during the war. This action 
afforded American vessels the same protection in the 
war zone as was given to vessels of other nations through 
the establishment of similar institutions. 

Little real encouragement can be found in the results 
of the Emergency Act of 1914, for in spite of the great 
inducements resulting from war conditions, there came 
a significant halt in seeking American registry. Fewer 
and fewer vessels applied for permission to fly the 
American flag. 

The Ship Purchase Bill. — Following the ship registry 



HISTORY OF AMERICAN MERCHANT MARINE S6S 

act, the preferential clause of the tariff and the War 
Risk Bureau, ambitious projects appeared to develop 
American shipping in foreign trade. At that junction a 
severe blow was struck by the administration's Ship 
Purchase Bill. In this, the Government announced it.'; 
intention to operate ships in foreign trade under govern- 
ment control. Without leaving commercial and financial 
enterprise time to recover from the initial shock of the 
war, the Government took this unfortunate form of ex- 
pressing its discontent with the failure of private 
shipping concerns to avail themselves of the momentous 
opportunity to build up an American merchant marine. 
The only ships that could have been bought were the 
interned German ships in our ports, which were needed 
to carry cotton to Germany, not yet cut off by the 
blockade. But the British objection to the purchase of 
German ships caused the administration so to veil iiis 
intentions as to ships and services that it finally appeared 
ar> if the administration were asking for ships from un- 
namable sources to institute unnecessary and super- 
fluous services. The bill was defeated in February, 1915. 
Seamen's Law. — Another unfavorable Government 
policy was introduced by the enactment of the Seamen's 
Law. This bill had once before passed both the House 
and the Senate, but had been vetoed by President Taft 
just before the close of his administration. In the Presi- 
dential campaign of 1912 both parties committed them- 
selves to the passage of the Seaman's Bill. The Sea- 
men's Bill accordingly was introduced into the Sixty- 
third Congress and after almost two years of considera- 
tion was unanimously adopted by both Houses of Con- 
gress. It became effective for American vessels Novem- 
ber 4, 1915, and has applied to foreign vessels since 



566 OCEAN SHIPPING 

March 4, 1916. The Attorney-General has decided that 
the severe requirements as to Ufe-saving equipment and 
the manning of such equipment do not apply to foreign 
vessels owned in countries with which the United States 
still has reciprocity treaties. American ships thereby 
are placed under a further handicap. 

The Seamen's Law contains the stipulation that on a sea- 
going steam vessel of one hundred tons or over 75 per cent 
of the crew in each department must be able to understand 
any order given by the officers. This paragraph prevents 
the employment of Asiatic crews on American vessels and 
thereby makes it practically impossible for American ships 
to compete in the Pacific with Japanese vessels on which 
the Asiatic crews naturally understand the language of 
their officers. 

The enforcement of this Act is in the hands of the 
Secretary of Commerce. Through the construction which 
he has put on the language of this paragraph (section 
13), he has considerably mitigated the hardships placed 
upon American shipowners.* 

Some important provisions of the Act. — According to 
this law, the deck crew of a seagoing steam vessel of 
one hundred tons or over is to be composed in the first 
year after the passage of the law of forty per cent, of 
rated able seamen; in the second year, of forty-five per 
cent; in the third year, of fifty-five per cent; and there- 
after, of sixty-five per cent exclusive of officers and 
"apprentices." Able seatnen are rated as such only after 
three years' service at sea and upon certification of this 
service and of their physical capacity by the Department 
of Commerce. Attempts are being made to modify this 

*See Andrew Furuseth's protest (Senate Document No. 694). 



HISTORY OF AMERICAN MERCHANT MARINE 567 

section. The Rowe Bill is the most' prominent.* If 
passed, it would reduce the time of training very consid- 
erably. The rapid increase in the number of ships 
operated under the American flag has created a new situ- 
ation, radically different from the one prevailing when 
the Seamen's Bill was passed. . Change of circumstances 
necessitates change of law. 

The most disputed section of the Seamen's Act is that 
which virtually states that American seamen in all ports 
and foreign seamen in American ports may desert at will 
and demand one-half of their earned wages. The 
Merchant Marine Act, 1920, contains a provision (section 
31) of the same nature. By a decision handed down on 
March 29, 1920, the Supreme Court declared this statute 
applicable to foreign vessels in American ports. The 
advocates of the Seamen's Act claim that this section is 
largely responsible for the gradual equalization of sea- 
men's wages of all nations. It is claimed that Japan and 
Greece excepted, all seafaring nations have had to raise 
the wages of their seamen to within fifteen per cent of 
the American wage level.'' Mr. Rosseter, former Direc- 
tor of Operations of the Shipping Board, admits that 
through its effect upon the wages paid to foreign sea- 
men, the Seamen's Act has been beneficial to the Ameri- 
can Merchant Marine. But it is difficult to determine 
to what extent abnormal war conditions are blurring the 
picture. Undoubtedly depreciation of foreign money 
values, the international exchange situation, changes 
affecting the general attitude of labor, etc., have con- 
tributed much toward raising the wage level of foreign 

1 See H. R. 9692 ; for discussion of its provisions see Hearings on 
Establishment of an American Merchant Marine, pp. 1S60#. 

2 See Nautical Gazette, March 27. 1920. 



568 OCEAN SHIPPING 

seamen. It remains to be seen whether the permission to 
desert is a real blessing or a boomerang. It should be 
remembered that the former strict prohibition of deser- 
tion, the so-called "involuntary servitude" as the advo- 
cates of the Seamen's Law choose to call it, was the out- 
growth of conditions elemental to shipping, which no law 
can change. "It was enacted not on behalf of the masters 
of vessels, nor of seamen, nor of ships, nor of owners, 
but in the just interest of all. It was a master's assurance 
against the desertion of a crew in a foreign port where 
other sea labor was unobtainable; it was a seamen's 
assurance against being beached because of a master's 
whim or parsimony or because a master could ship men 
at a smaller wage — a sailor's inviolable guarantee from 
the Government that a vessel must bring him back from 
the ends of the earth to the port of departure or another 
port in the United States ; it was a vessel's assurance 
that she would not be left helpless; it was an owner's 
assurance that his property would be reasonably safe- 
guarded at all times and that he would be permitted to 
perform his legal contracts." ^ 

The subsequent development centers around the work 
of the United States Shipping Board which will be 
described in the following chapter. 

' See William Brown Meloney, The Heritage of Tyre, p. 147. 

REFERENCES 

Annin, R. E. Ocean Shipping, Chaps. I and II. (1920.) 
Bankers Trust Company, New York. America's Merchant Marine. 

(1920.) 
Clark, A. H. The Clipper Ship Era, 1843-1869. (1911.) 
FuRUSETH, A. Various Pamphlets and Magazine Articles. 
Hough, B. O. Ocean Traffic and Trade, Chap. XI. (1915.) 



HISTORY OF AMERICAN MERCHANT MARINE 569 

Hurley, E. N. The Neiv Merchant Marine. (1920.) 

Johnson and Huebner. Principles of Ocean Transportation, part 

IV. (1919.) 
Marvin, W. L. The American Merchant Marine, Its History and 

Romances from 1620-1902. (1902.) 
Meloney, W. B. The Heritage of Tyre. (1917.) 
Pepper, C. M. American Foreign Trade. Chap. X. (1919.) 
Phelps, M. The American Merchant Marine, Debaters' Handbook. 

(1920.) 
Proceedings of the Academy of Political Science. Vol. VI. Oct. 

I91S. The American Mercantile Marine. Various Articles. Vol. 

IX. Feb. 1921. American Foreign Trade Relations (Various 

articles). 
Spears, J. R. The Story of the American Merchant Marine. (1915.) 
United States. Shipping Board. Shipping Facts. (1918.) 



CHAPTER XXIX 
THE WORK OF THE UNITED STATES SHIPPING BOARD 

War problems displace peace conditions. — At the be- 
ginning of 1917 the outlook for the American Merchant 
Marine was blurred and confused. Whether the measures 
which had been adopted would promote shipbuilding in any 
great degree was at least dubious. Questions of costs of 
construction and operation were gravely weighed. But when 
the United States declared war on Germany, these questions 
were brushed aside by the imperative need for ships. The 
exigencies of warfare require results, and a nation at war 
does not stop to count the costs. 

The entrance of the United States in the World War in 
April, 1917, did not find the industries of the country wholly 
unprepared for the emergency. For more than two and a 
half years ever-increasing quantities of munitions and sup- 
plies had poured out of our great seaports ; agriculture and 
industry had largely adapted themselves to the situation. 
The new emergency meant additional strain upon their 
capacity ; but the ground had been broken and the founda- 
tion was laid. 

But this was not the case in the shipbuilding industry. 
Before the war this important branch of American enter- 
prise had been sadly neglected, so that it appeared like a 
pigmy beside its big brothers, the iron and steel industries, 
and the war itself had not given the stimulus which other 
branches had experienced. The declaration of war meant 
more for American shipping and shipbuilding than for any 
other industry. 

Demand for ships. — For no other product of human 

570 



IVORK OF THE U. S. SHIPPING BOARD 571 

energy had the demand grown as a result of the war to 
anywhere near the extent as it had for ships. The realiza- 
tion of this fact which, by now, has become the common 
property of the American people could not fail to stir into 
life the potential forces of this country as a builder of ships. 
We saw in the previous chapter that the year 1916, though 
full of splendid opportunities, had failed to awaken the dor- 
mant energies, lulling them rather, as it were, with such 
narcotics as threatening government ownership and a Sea- 
men's Bill. 

The entry of America into the war changed all this at 
an instant; the spell was broken immediately. The two 
main deficiencies had been lack of men and scarcity of 
money. The empty purse of the shipyard owners was filled 
as never before out of Uncle Sam's cornucopia. The youth 
of the land that in former times had despised or dreaded 
the life of the sea, now, prompted by patriotic enthusiasm, 
rapidly filled the ranks of the Navy, the Naval Reserve and 
the Merchant Marine and swelled their numbers to hitherto 
unheard-of proportions. 

There is a good deal of romance in this story of a hundred 
million people on a billion dollar land suddenly remember- 
ing that "Old Glory" once had flown from mastheads in 
every port of the globe — this metamorphosis of dreary 
wastes of marshes into humming shipyards, turning out 
wooden and steel ships at a rapid pace, the transformation 
of landlubbers into sturdy seamen, and, above all, the change 
of front which took place in the consciousness of a whole 
people. 

The question of government ownership and operation. 
-—Without wishing to belittle the wonderful achieve- 
ments which private enterprise accomplished in ship con- 
struction and ship operation during the trying times of the 



572' OCEAN SHIPPING 

war, we confine ourselves in this chapter to the story of 
the United States Shipping Board, that Government agency 
in whose hands was plaiced the task of co-ordinating all 
available resources and energies of the nation in one great 
effort to offset the ravages of the submarine and to supply 
the unprecedented amount of tonnage required to bring the 
war to a successful issue. 

We do not need to discuss here the much-debated ques- 
tion of Government ownership and operation versus private 
ownership and operation. For business and Government 
are at one as to the abstract merits of the case. Both agree 
that private ownership and operation is far more efficient. 
In war time and during the period of reconstruction abnor- 
mal conditions prevail, which must be met with special 
measures. There may be differences of opinion as to how 
far these special measures have to deviate from the normal 
and violate generally accepted principles. But with the 
return to normal conditions these difficulties will disappear 
and private ownership and operation will be restored.' 

Creation of the Shipping Board. — The legislation which 
created the United States Shipping Board is contained in 
the Shipping Act of September 7, 1916. The Emergency 
Fleet Corporation, the executive adjunct of the Shipping 
Board, was organized April 16, 1917, with a capital of 
$50,000,000. In addition to this, during the war, various 
emergency powers in the control of shipping were conferred 
upon the President, and through him upon the Shipping 
Board or the Emergency Fleet Corporation. These powers 
covered a wide range and included the authority to take 
over the output of any industrial plant or to take over the 

'Those who wish to make a detailed study of the arguments for 
and agamst Government ownership and operation are referred to 
The American Merchant Marine" by E. M. Phelps Debators' 
Handbook Series, The H. W. Wilson Company, New York 1920 



tVORK OF THE V. S. SHIPPING BOARD S73 

whole plant if necessary, to requisition ships either com- 
pleted or under construction, to construct and to operate 
ships with no other conditions than the limits of the finan- 
cial appropriations, to commandeer property for developing 
housing facilities, and to control the transfer of vessels to 
foreign ownership. It is on the basis of these emergency 
powers — chiefly the Emergency Shipping Fund Provision of 
the Urgent Deficiencies Act of June IS, 1917 — that the 
Shipping Board has carried on its work, rather than on the 
basis of the "Shipping Act, 1916." 

Organization of the Shipping Board. — It would lead 
us too far to give a detailed description of the huge organ- 
ization which had to be built up in order to carry out the 
many tasks which were entrusted to the Board. The task, 
was worthy of American organizing ability. 

The efforts of the Board may be roughly divided into the 
immediate problems of ship construction and ship opera- 
tion on the one hand, and the multitude of duties which 
indirectly bear upon this program, such as port and harbor 
improvements, legal adjustments, recruiting service, labor 
conciliation, etc. These indirect functions were performed 
by the Board Organization while the Emergency Fleet built 
and operated the ships. 

Ship construction; program and achievements. — The 
original construction plan was strictly a war program in 
volume and details of construction. The Armistice found 
the Board in the midst of the execution of this program, 
which had to be curtailed and modified to do justice to 
changed conditions. The table on page 574 shows the 
original program and the changes which had to be made.' 

^ From Report of Chairman Payne to Senate Committee on Com- 
merce. 



S74 



OCEAN SHIPPING 









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575 




576 OCEAN SHIPPING 

It appears that, on that date, 30 keels remained to be laid, 
151 ships had yet to be launched, and 272 ships of 2,205.108 
P.W. tons had not yet been delivered. Rear-Admiral W. 
S. Benson, present Chairman of the Shipping Board, ex- , 
pressed the hope that the program would be completed some 
time during 1920.' The completed fleet, according to a cir- 
cular issued by the Shipping Board, will represent a line 
of vessels 158 miles long, which, if steaming a mile and a 
quarter apart, would reach from New York to Southamp- 
ton — America's Bridge of Ships. The total deadweight ton- 
nage of these vessels is equal to the carrying capacity of 
388,363 freight cars of thirty-five tons each. Altogether 
800,000,000 rivets will have been used. 

The following statement regarding the Shipping Board 
fleet was made by Admiral Benson on July 19, 1920, in a 
speech delivered in the Pan-American Building, Washing- 
ton, D. C. : 

"The total seagoing merchant marine of the United 
States at June 30, 1920, consisted of 3,404 vessels of 11,- 
278,741 gross tons, or approximately 16,918,212 deadweight 
tons. 

"Of this total the Shipping Board now owns 1,502 vessels 
of 6,238,948 gross tons, equivalent to 9,358,421 deadweight 
tons. Of this total owned by the Shipping Board 673 
vessels of 2,521,712 deadweight tons are vessels of less than 
5,000 deadweight tons each. 

"Vessels between 5,000 and 6,000 deadweight tons num- 
ber 145, or 754,853 deadweight tons. 

"The tonnage at present controlled by the Shipping 
Board, exclusive of the vessels operated by the Army, are 
distributed in the various trades as follows : 

'■Address delivered at National Marine League Dinner, April 



WORK OF THE U. S. SHIPPING BOARD 5V 

39% in Northern European 

io% Southern " 

3% African 

16% Trans-Pacific 

11% South America 

9% West Indies and Caribbean 

7% Domestic Service 

3% Operating Between Foreign Ports 

"Of the steel vessels owned by the Shipping Board 
engaged in these services, 615 are operating from North 
Atlantic, ports, 62 from South Atlantic ports, 184 from 
Gulf ports, 113 from Pacific ports, 74 are employed in 
coastwise service, 63 are operating between foreign ports, 
121 are at present unallocated to any designated berth line 
service. These latter virtually constitute the tramp service 
of the fleet. Four vessels are operating from unspecified 
home ports. 

"Of the total operating on the North Atlantic District, 
273 vessesl are operating from the port of New York, 133 
from Norfolk, 101 from Baltimore, 75 from Philadelphia; 
28 from Boston, and 5 from Portland, Maine. 

"The total deadweight tonnage operating from North 
Atlantic ports is 4,304,003. Of the total tonnage operating 
in berth liner service, 50% of the deadweight tonnage is 
operating from the Atlantic ports. 

"The total tonnage operated by the U. S. Shipping Board, 
excluding vessels operated by the Army and Navy, on June 
20, 1920, numbered 1,490 vessels, the deadweight tonnage 
of 9,223,894. (12 vessels operated by Army.) 

"Of the 1,502 vessels owned and controlled by the Ship- 
ping Board on July 1, 1920, 1,394 were cargo vessels, 27 
were cargo and passenger vessels, 63 were tankers, 15 re- 



578 OCEAN SHIPPING 

frigerators and 3 transports. The cargo and passenger ves- 
sels include 2 vessels chartered from Peru, on which the 
Shipping Board has an optional agreement of purchase. 

"Included in the total number of vessels owned and con- 
trolled on July 1 are 267 wood and composite vessels and 4 
concrete vessels. 

"At the close of the fiscal year June, 1920, 194 of these 
wood vessels were in active service and 73 were in charge 
of managing caretakers and withdrawn from operation." 

British and American ship-building record compared. 
— A comparison with the production in British yards is 
significant. Prior to the war the maximum annual tonnage 
launched in the United States in recent years was reached in 
1910, when approximately 500,000 D.W. tons left the ways. 
The maximum in Great Britain was attained in 1913 with 
the launching of 3,000,000 deadweight tons. The yards in 
the United States accomplished this result in the first six 
months of 1918, and in the year 1919 more than doubled the 
British record. The Third Anr.ual Report oi the Shipping 
Board contains on p. 59, the chart given on page 579 which 
shows the comparative progress of the merchant marine 
tonnage of the United States and Great Britain, expressed 
in deadweight tons: 

To be sure, the year 1920 witnessed the return of 
Great Britain to its former place as the premier shipbuilder 
of the world. Figures published in the early part of July, 
1920, showed Great Britain leading by more than a million 
and a half gross tons. The reason is simple. As the Gov- 
ernment ship construction program is approaching its end, 
American shipyards are partly being dismantled and some 
of the remaining ones are lacking orders. The tonnage 
building for private account is not big enough to fill the gap 
left by the completion of the Shipping Board fleet. In this 



WORK OF THE U. S. SHIPPING BOARD 



579 



SHIPBUILDING PROGRESS OF UNITED STATES AND 
GREAT BRITAIN 



Uniteb States 
2(54.424 I3lW.T_. 1789 

724124 m.TZ., 1794 

(95(,609 D.W,T-i-i 1796' 

1383,739 D.W.T— 1800 (I80l) 

2.1 371 74 D.W.T— 1810; 

1,920.251 D.W.T.^ "S^rsl r620 
1.787663 D.W.T..*ij 

,31271.147 aw.T^jia 

5.303.180 D.W.T 

8.030.807 D.W.T. 

6.369.761 D.W.T. 

6.102052 D.W.T 

6.636.746 O.W.T 

l7.747,258 D.W.T 

IJi262,l23 D.W.T 

11393.437 D.W.T. 

14386.776 nW.T 
24,386.276 p.W.T 



Great Britain 




4586,069 O.W.t 
5,4581599 D.W.T 
5,959,334 D.WT, 
5.696,592 D.W.T 
7450.960 D.W.T 
9.524,164 D.W.T 
12349.678 D.W.T 
16,085,551 D.WT 
19,006.135 D.W.T 
2l.798.t98 D.W.T 
24190.632 D.W.T. 
30,064,473 DW.T 
32.516,955 D.W.X 
25.200.585 D.W.T 
33.126.426 D.W.T 



S80 



OCEAN SHIPPING 



connection it may be fitting to take up in general the effect 
which the World War had upon shipping losses and con- 
struction. But 1920 launchings gave the United States a 
lead of 20 per cent over the United Kingdom 

The war's effect on world shipping. — The enormous 
progress made by this country in merchant ship production 
and the marine losses suffered by the world's maritime 
nations during the World War, and finally the provisions 
of the Peace Treaty, have completely shifted the equilibrium 
of maritime power as far as merchant tonnage is concerned. 
According to Lloyd's Register of Shipping, the losses of 
merchant steamers of the principal maritime nations during 
the World War from August 4, 1914, to the Armistice of 
November 11, 1918, were: 



Country 



War 
Losses 



Marine 
Losses 



Total 



United Kingdom . . 
British Dominions 

American 

Belgian 

Brazilian 

Danish 

Dutch 

French 

Greek 

Italian 

Japanese 

Norwegian 

Spanish 

Swedish 

Total 



Gross Tons 

7,753,311 

169,712 

343,090 

85,842 

20,328 

210,880 

201 797 

722,939 

349,661 

745,766 

119,764 

976,516 

157,527 

180,415 



12,037,548 



Gross Tons 

1,032,779 

99,866 

187,948 

19,239 

10,951 

34,422 

27,244 

84,138 

65,014 

115,669 

160,269 

195,244 

80,335 

83,586 



2,186,704 



Gross Tons 

8,786,090 

269,578 

531,038 

105,081 

31,279 

245,302 

229,041 

807,077 

414,675 

861,435 

270,033 

1,171,760 

237,862 

264,001 



14,224,252 



These losses were more than made good by new con- 
struction so that the net effect of the war was as follows : 



WORK OF THE U. S. SHIPPING BOARD 



S8J 



STEAM TONNAGE OF 100 TONS AND UPWARDS OWNED BY 

THE PRINCIPAL MARITIME COUNTRIES BEFORE 

AND AFTER THE WORLD WAR 



Country 



June, 1914 



Tons 
Gross 



June, 1919 



Tons 
Gross 



Difference 

Between 

1914 and 1919 



Tonnage 



Per- 
centage 



United Kingdom. . . . 
British Dominions. . . 
United States: 

Seagoing 

Great Lakes 

Austria-Hungary. . . . 

Denmark 

France 

Germany 

Greece 

Holland 

Italy 

Japan 

Norway 

Spain 

Sweden 

Other Countries 

Total Steam Tonnage 



18,892,000 
1,632,000 

2,027,000 
2,260,000 
1,052,000 

770,000 
1,922,000 
5,135,000 

821,000 
1,472,000 
1,430,000 
1,708,000 
1,957,000 

884,000 
1,015,000 
2,427,000 



16,345,000 
1,863,000 

9,773,000 

2,160,000 

713,000 

631,000 

1,962,000 

3,247,000 

291,000 

1,574,000 

1,238,000 

2,325,000 

1,597,000 

709,000 

917,000 

2,552,000 



—2,547,000 
-1-231,000 

-t-7,746,000 

—100,000 

—339,000 

—139,000 

-1-40,000 

—1,888,000 
—530,000 
-1-102,000 
—192,000 
-1-617,000 
—360,000 
—175,000 
—98,000 
-f 125,000 



—13.5 
-1-14.1 

-1-382.1 

—4.4 

—32.2 

—18.1 

+2.1 

—36.8 

—64.6 

-F6.9 

—13.4 

-f36.1 

—18.4 

—19.8 

—9.7 

-1-5.2 



45,404,000 



47,897,000 -1-2,493,000 



-1-5.5 



This table, however, does not take into consideration the 
normal growth which the world's merchant tonnage would 
have enjoyed if no war had interfered. During the calen- 
dar years 1919 and 1920 the world's shipyards launched 
approximately 7,150,000 and 5,850,000 gross tons respec- 
tively. On December 31, 1920, no less than 7,861,363 gross 
tons were building throughout the world. 

Shipping Board finances. — To return now to our dis- 
cussion of the work of the Shipping Board, the question of 
cost ought to be considered. The total expenditure required 



582 OCEAN SHIPPING 

for the completion of the modified Shipping Board program 
will be approximately $3,000,000,000. Qn June 30, 1919, 
the following oiBcial estimate was given out: 

Ships $3,087,418,087 

PlaSts 168,413.797 

Administration 45,000,000 

Housing 68,486,700 

Drydocks 20,294,394 

Transportation 10,123,309 

Since then, however, additional reductions have been 
made which will probably keep the total below the figure 
given above. 

There were three types of contracts for ship construction 
awarded by the Emergency Fleet Corporation: 

(a) Lump sum; 

(b) Cost plus fee (fixed or sliding) ; 

(c) Agency. 

The Corporation favored the lump sum form, but many 
contractors were unwilling to work under this form because 
of the uncertainties due to war conditions. Nevertheless 
over 80 per cent .of the contracts were of the lump sum type. 

Agency yards. — The agency form was used primarily 
in connection with the so-called fabricated shipyards at, 
Newark, N. J. (Submarine Boat Corporation) ; Bristol, 
Penn. (Merchant Shipbuilding Corporation, controlled by 
the Harriman interests) ; Hog Island, Penn. (American 
International Shipbuilding Corporation, a subsidiary of the 
American International Corporation, which in turn is affili- 
ated with the National City Bank of New York) ; and at 
Wilmington, N. C. Under this type of contract the agent 
received a fixed fee based upon an estimated cost, while the 
Emergency Fleet Corporation bore the expense of building 
the yard, constructing the ships, etc. The agents received 
no fee for yard construction. Any saving in the cost of 



WORK OF THE U. S. SHIPPING BOARD S83 

ship construction below the estimate was to be divided 
equally among the agent, the owner and the employees. Any 
increase in the cost was deducted from the agent's normal 
fee until a minimum was reached.' 

Hog Island; history and record. — Of the fabricated 
yards, Hog Island, as the world's largest shipyard, having 
50 shipways, 7 outfitting piers, and 250 buildings, covering 
a total area of almost 850 acres, attracted world-wide atten- 
tion. The yard itself cost approximately $66,000,000, which 
was far in excess of the original estimate. On October 8, 
1919, the Shipping Board Information Bureau gave out the 
following statement: 

"With the delivery of the Nobles, a 7800 d.w.t freighter, the 
Hog Island Shipyard compkted delivery of its first fifty vessels to 
the United States Shipping Board. The total tonnage delivered is 
391,250 d.w.t. This is the world's record for shipbuilding in a single 
yard. 

"The total tonnage delivered by the American International Ship- 
building Corporation (Hog Island Shipyard) is 105,705 d.w.t. 
greater than the deadweight tonnage of seagoing vessels delivered 
from American yards for the year 1916 which was the record pre- 
war year in ship production. In that year (1916) there were built 
in all yards in the United States 38 seagoing vessels of 1500 d.w.t. 
upwards, totaling 285,555 d.w.t." 

During its entire career. Hog Island turned out a total of 
122 steel ships, the last being delivered in January 1921. 

At the time of this writing, the future of this great enter- 
prise hangs in the balance. The yard was planned and 
built for emergency shipbuilding, and the conditions which 
warranted its construction no longer exist to-day. As a 
shipyard the enterprise is too unwieldy to compete with 
smaller concerns better adapted to normal conditions. There 
is a possibiUty of turning the wet basins into a commercial 

'■ See Third Annual Report of U. S. Shipping Board. 



584 OCEAN SHIPPING 

terminal for ocean-going vessels and of using some of the 
buildings for transit sheds, warehouses, etc. 

Expansion of shipbuilding facilities. — All told, the 
Emergency Fleet Corporation had to increase the available 
shipyard facilities of the country from 61 yards with 215 
ways, to 341 yards with 1,284 ways (including those yards 
which were under construction at the time of the armistice 
and subsequently dissolved). This is a fivefold increase 
between the declaration of war and the signing of the 
armistice. 

But the building of ships, either requisitioned during con- 
struction or contracted for, was but one — though naturally 
the most important one — of the ways by which the Shipping 
Board acquired its large fleet. The other additions came 
from the following sources : 

(i) Seized German and Austrian ships. These com- 
prised a gross tonnage of approximately 600,000 
tons. 

(2) Commandeered Dutch and other neutral vessels. 

The Dutch ships alone represented a total of over 
350,000 gross tons. 

(3) Foreign ships chartered to the United States Ship- 

ping Board or under agreement with it. The total 
of these was 161 ships of almost 700,000 gross 
tons. 

(4) Ships built for the Board in Japanese and Chinese 

yards. These numbered 49 vessels of 415,000 
D. W. tons. 

The Shipping Board Fleet.— When the armistice ended 
the war emergency, the Shipping Board control over many 
vessels was gradually released. But on June 5, 1920, the 
Board still owned and controlled the following fleet : 



WORK OF THE U. S. SHIPPING BOARD 



585 



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586 OCEAN SHIPPING 

Problems of operation. — When we now turn from the 
problems of construction to those of operation, the first 
question naturally concerns the agency operating the ships. 
There were three main methods by which the Shipping 
Board tonnage was operated: 

(1) Directly by the Emergency Fleet Corporation; 

(2) By assignment to Managers; 

(3) By assignment to Operators. 

The first way was avoided wherever possible. Almost 
exclusively vessels used by the Emergency Fleet Corpora- 
tion for its own purposes, such as those engaged in trans- 
porting lumber to build ships and shipyards, were operated 
directly by the Board. But, in order to develop organiza- 
tions capable of handling the vast business of the great 
American Merchant Marine, the Shipping Board has encour- 
aged private enterprise and has assigned the new tonnage 
to those who are in a position properly to handle the ves- 
sels and in whom the Shipping Board has confidence. Wher- 
ever possible this method has been preferred to that of 
building new governmental agencies to do the work. 

Types of operating agreements. — The general features 
of the two types of assignment contracts were described in 
the Second Annual Report of the Shipping Board as fol- 
lows ■} 

"Assignments to managers, whose duties cover the en- 
gaging of officers and crew, purchase of consumable stores, 
deck and engine-room supplies, and general attention to the 
steamer from a husband's or shipowner's point of view. 

"Assignments to operators, whose duties are to attend 
to the loading and discharging of the cargo, paying all port 
charges, giving attention to the proper stowage of the cargo, 

* Pages 62, 63. See Appendices E and F. 



WORK OF THE U. S. SHIPPING BOARD 587 

collection of freight, demurrage, etc., and, in general terms, 
to operate the steamer in the same manner as if she were 
under time charter to them. 

"Both managers and operators are only acting as agents 
for the Division of Operations of the Emergency Fleet 
Corporation. 

"All assignments are passed upon individually by the 
Board in each case and entered on its minutes. These 
arrangements find legal form in agreements made by the 
Division of Operations of the Emergency Fleet Corpora- 
tion with managers and operators, under which managers 
are paid a fixed monthly fee and operators a percentage of 
the gross freight or a lump sum based on trade and cargo 
carried and services rendered. 

"Operators are at all times subject to the orders of the 
Shipping Board as to voyages, cargoes, priorities of cargoes, 
charters, rates of freight, and other charges, and all matters 
arising out of the use of the vessel. 

"Managers and operators account to the Comptroller of 
the Division of Operations of the Emergency Fleet Cor- 
poration for all moneys expended and collected in connec- 
tion with the operation of the vessel. The Shipping Board 
may terminate the assignment of the vessels on 24 hours' 
notice and the operator may terminate the agreement on 30 
days' notice." 

By April, 1920, about 160 such agents operated more than 
500 steamers of more than four million D. W. tons on 181 
regular routes and about an equal amount of tonnage in 
full cargo tramping and miscellaneous services.' 

Under the original agreements, the managing and operat- 
ing agents had relatively little freedom of action. War 

' Speech by Mr. W. F. Taylor, Assistant Director, Division of 
Operations, United States Shipping Board, delivered before United 
States Chamber of Commerce on April 29, 1920. 



S88 OCEAN SHIPPING 

emergency requires centralized control. As the world slowly 
returns to normal conditions, such centralization becomes 
superfluous. Several changes in the agreements just re- 
ferred to have reflected this transition. The reins were held 
more and more loosely, until to-day the agents have almost 
as much freedom of action as if they were owners. We 
let one of the executives of the Division of Operations 
explain this latest change : ^ 

Recent changes. — "The Board, recognizing and con- 
curring in the almost unanimous sentiment of the coun- 
try in favor of ultimate private ownership and operation, 
this being also reflected by the trend of pending legislation, 
recently adopted a fundamental change in its relation with 
the shipping concerns acting as agents or operators of Ship- 
ping Board steamers. This was done by means of a new 
managing agency agreement, whereby the shipping concern, 
acting as managing agent, undertakes to operate the vessel 
to all intents and purposes as owner, receiving as compen- 
sation a portion of the net earnings obtained. This is ex- 
pected not only to prove an added incentive for efficient 
operation, but even more important, it duplicates as nearly 
as possible the condition of private ownership and opera- 
tion, increasing the agent's initiative, resourcefulness and 
confidence in meeting the situations which would confront 
him as an owner. Added authority is given to the agent 
under this plan commensurate with his added responsibility, 
and he is permitted to use his own discretion in the matter 
of selecting employment for the vessel and making rates, 
terms and conditions for cargo. This is all, of course, sub- 
ject to the general supervision of the Board, whose final 
control is exercised in all matters affecting the public inter- 

1 Ibidem. 



WORK OF THE U. S. SHIPPING BOARD 589 

ests or convenience, or where necessary in the development 
of our foreign commerce and trade routes. 

"While this plan afifords a flexible and commercial service 
for the benefit of our exporters using Shipping Board 
steamers, it is obviously necessary to prevent destructive 
competition between the government-owned vessels through 
their several managing agents. This is accomplished and the 
stability of rates required in the best interests of the ship- 
pers is maintained by means of conferences between our 
agents in each of the various trades operating out of the 
North Atlantic, South Atlantic, Gulf and Pacific districts." 
The latest move is to adopt a bare boat charter as the pre- 
vailing method of Shipping Board tonnage operation. 

The Shipping Control Committee. — As the centralized 
control over shipping is being relaxed, the work of the 
Division of Operations becomes less complex. At the height 
of the war emergency this body exercised authority over a 
larger aggregate of tonnage than had ever before been 
assembled under one control. This enormous power was 
wielded by the Shipping Control Committee, consisting of 
three men, one of whom represented the British Ministry 
of Shipping. This Committee was created in conjunction 
with the War Department. 

Briefly, the powers delegated to this Committee may be 
grouped under two main heads : 

(1) As the agent of the Shipping Board, it allocated 

the vessels owned and controlled by the Board to 
cargoes and trade routes, so as to use the avail- 
able tonnage to the maximum efificiency in the 
most essential trades. 

(2) As the agent of the War Department, the Com- 

mittee had entire charge of the operation of the 



590 OCEAN SHIPPING 

fleet of steamers engaged in transporting military 
material to the American Army abroad. 

The greater part of the work was carried on by the Divi- 
sion of Trades and Allocations. It involved the distribu- 
tion of an enormous tonnage in such a way as to take 
proper care of such important requirements as nitrates, 
manganese ore, sugar, hemp, wool, hides, tanning extracts, 
etc. This control extended over the entire globe and its 
significance is self-evident. A special Division of Dispatch 
had to report on the stay in port of each vessel, account 
for delays, assist operators and owners in securing bunkers, 
clearance, crews, etc. 

The Chartering Committee. — On September 6, 1917. 
the Shipping Board resolved that no vessel should be char- 
tered to an American or neutral without the approval of 
the Board, and on September 29, 1917, a Chartering Com- 
mittee of three was appointed to administer that control. 

Several main objects were kept in mind: 

(1) To induce neutral tonnage to accept its fair share 

of transatlantic trade ; 

(2) To effect a considerable reduction in the high 

charter rates then prevailing; 

(3) To secure tonnage for the most essential trades 

and commodities. 

The Committee had the authority to approve, disapprove 
or return for revision all charters not under the direct con- 
trol of the Shipping Board. After April 18, 1918, berth 
rates also were fixed by the Board. 

During its existence of about one and one-half years the 
Committee passed upon over 19,000 charters,' besides cover- 

1 From letter of Mr. Welding Ring, Chairman, to the author. 



IVORK OF THE U. S. SHIPPING BOARD S91 

ing a vase amount of information and particulars as to regu- 
lations. The duties of the Chartering Committee were prin- 
cipally to see that all charters conformed strictly to the 
terms decided upon by the Shipping Board as to voyages 
(in many cases these voyages were not permitted in the 
war zone), and also to determine the necessity for tonnage 
in various directions. Added to this there was the duty of 
seeing that the charters strictly complied with the rates of 
freight adopted by the Shipping Board. The Chartering 
Committee was in close touch and working in harmony 
with the British Board of the same nature, so that the con- 
trol of shipping all over the world was in the hands of the 
British and the United States Governments because they 
controlled bunkers and supplies for steamers. 
■ Research work of the Division of Planning and Sta- 
tistics. — Another exceedingly important Division which 
was closely though indirectly linked up with the operation 
of the large fleet controlled by the Board was the Division 
of Planning and Statistics." In a way, this division may be 
termed the brain of the organization. To it was committed 
the scientific guidance in the conservation and maximum 
utilization of tonnage. Its acivities followed two main lines : 
First, that of commodities and trades ; and second, that of 
ships and their employment. We quote from the Second 
Annual Report of the Shipping Board:* "Under the first 
heading (the study of commodities and trade) comes the 
investigation of all factors affecting the import program, 
such as uses of commodities, possible substitutes, stocks on 
hand, essential requirements of Government and commer- 
cial bodies, countries and ports of origin, and shipping re- 
quired for import. On the basis of these studies lists are 
prepared of imports to be prohibited or restricted; It is 

* Pages 75, 76. 



592 OCEAN SHIPPING 

often necessary, because of the shortage of shipping in cer- 
tain areas, to recommend priorities among essential imports 
from given countries or ports ; to make studies of the trade 
of entire regions with a view to eliminating cross-hauls, effi- 
ciently combing cargoes and defining standard shipping 
routes." It appears from the foregoing, that, while the im- 
mediate purpose of all these studies was to aid in the solu- 
tion of emergency problems, much of this work is of lasting 
value and represents an important contribution to the science 
of Commercial Geography, Traffic Geography, Industrial 
Geography, etc. We quote again from the same source: 

"The statistics compiled on ships and their movement 
cover a wide variety of facts. The division has on file spe- 
cial information derived from the sources concerning the 
number and types of vessels, their age, draft, size, cargo,- 
capacity, speed, motive power, material of construction, 
number of decks, holds, hatches, fuel consumption, etc. 
Records are kept of the daily movements of ships in all parts 
of the world, of the dates and ports of entry and departure, 
and the tonnage employed in the different trade regions. 
Charts and diagrams are prepared to show the assignment 
of vessels to given trades, the length of voyages and stays 
in port, the performance of vessels engaged in carrying 
specified commodities, etc. 

"Directly connected with this work on ships are many 
special studies on such subjects as the control of vessels, 
chartering and subchartering, losses and acquisitions of mer- 
chant ships, the efficiency of vessels of different sizes, the 
movements of ships and cargoes by ports, bunkerage and 
stowage, repairs and underloading, as well as studies on 
the suitability of American vessels and foreign vessels under 
American control for transfer from trade to Army use and 
from one trade to another. 



WORK OF THE U. S. SHIPPING BOARD 593 

"The work on commodities and on ships heads up in a 
regular monthly survey of the shipping and import situ- 
ation, in which a balance is struck between the tonnage re- 
quired to lift necessary imports from the various trade re- 
gions and the tonnage actually in service in those regions. 
Important special studies co-ordinate both phases of the 
work likewise, as for example, the comprehensive report on 
the relation of the shipping situation to the proposed military 
program, which dealt with available tonnage, limiting fac- 
tors in the shipbuilding program, the types of ships needed, 
and improvement of port facilities." 

Lack of space compels us to confine this story of the work 
of the United States Shipping Board to those performances 
which lie strictly within the field of shipping. Those who 
wish to have a complete account of all the phases of the 
Board's work are referred to the several Annual Reports 
and to Ex-Chairman Edward N. Hurley'is interesting vol- 
ume, The New Merchant Marine. It must also be remem- 
bered, much of the Board's work remains yet to be done. 



REFERENCES 

Hurley, E. N. The New Merchant Marine. Chap. II. (1920.) 
United States. Shipping Board. First, Second, Third and Fourth 

Annual Reports. 1917, 1918, 1919 and 1920. 

Emergency Fleet Corporation. Report of Mr. Charles Pies. 

April 30, 1919. 

Senate Committee on Commerce. Hearings on Regulation of 

Ocean Rates, Requisitions of Vessels, and Increasing the Powers 

of the Shipping Board. . (1918.) 

Senate Committee on Commerce. Hearings on Establishment of 

an American Merchant Marine. (1919-20.) 

House Committee on the Merchant Marine and Fisheries. Hear- 



594 OCEAN SHIPPING 

ings on the Bill Creating a Shipping Board, a Naval Auxiliary, 
and a Merchant Marine. (1916.) 

House Committee on the Merchant Marine and Fisheries. Hear- 
ings on United States Shipping Board, Emergency Fleet Corpo- 
ration. (1918.) 
Shipping Board. Bureau of Information. Various Statements. 

1917-1920. 



CHAPTER XXX 
THE MERCHANT MARINE ACT 1920 

Significance of Jones Act.— On June 5, 1920, President 
Wilson signed a bill,' the terms of which foreshadow a 
new era in the development of the American merchant 
marine. The "Merchant Marine Act, 1920" is the out- 
come of a number of exhaustive investigations made by 
the House Committee on Merchant Marine and Fisheries 
and the Senate Committee on Commerce, covering 
almost an entire year. To these Congressional Com- 
mittees, whose respective chairmen are Senator Wesley 
L. Jones of Washington and Representative William S. 
Greene of Massachusetts, was entrusted the momentous 
task of formulating the legislation which will make or 
unmake the American merchant marine at a moment in 
the country's history when the opportunities as well as 
the responsibilities are greater than ever before. The 
magnitude of the task appears from the title of the Act 
which reads: "To provide for the promotion and main- 
tenance of the American merchant marine, to repeal 
certain emergency legislation, and provide for the dis- 
position, regulation, and use of property acquired there- 
under, and for other purposes." 

General characteristics of the Law. — The Merchant 
Marine Act or the Jones Act, as it is commonly referred 
to, was not drawn up by "pussyfooters." Whatever its 
weaknesses may be, it does not dodge the issues. On the 
contrary, the Bill has teeth, sharp teeth to hurt if it 
must be. The framers of the Bill took it for granted 
"that every patriotic citizen now wishes to see a mer- 

1 See Appendix G. 



596 OCEAN SHIPPING 

chant marine under the American flag large enough to 
carry the major part of our own foreign trade and such 
part of the world's carrying trade, as may be commen- 
surate with our wealth, power and standing among the 
nations of the world, and that whatever is necessary to 
bring that about they want to be done." ^ The spirit in 
which the bill was drawn is shown in the following 
paragraphs : 



"No interests but American interests have been kept in view. 
We are sure that other nations will look after their citizens and 
their needs, and if our business is to be cared for, we must do it. 
Years ago our great commercial rivals said, "To hell with Ameri- 
can ships !" That spirit exists to-day. It is expressed in milder 
terms, but with no less certainty. Fair Play, the great shipping 
organ, of London, said a short time ago : « 

" 'Senator Jones and other enunciators of golden periods must 
clearly understand this, that things being as they are, so far as Great 
Britain is concerned there can be no question of mutuality of sac- 
rifice. We have always been generous and, in the matter of our 
interpretation of free trade, fools; but when it has been a question 
of the survival of the fittest we have invariably done our level best 
to crush or mold opposition, and, as regards America's new mer- 
cantile marine, we shall go on doing it and expect her to do the 
same by us.' 

"This is what we must meet. We are going to meet it not in 
the spirit of destruction, but in the spirit of fair play and with a 
determination to secure our just portion of the world's carrying 
trade. 

"The nations that have been doing the ocean-carrying trade during 
the last 50 years are not going to give it up without fierce struggle. 
They are not willing for us to do a fair part. They know the busi- 
ness. They have the experience and the business facilities and con- 
hections throughout the world that give them a great advantage. 
Governmental aid and power will be co-ordinated with private 

"■Report submitted by Senator Jones, Calendar No. 520, Senate 
Report No. 573, p. 1. 



THE MERCHANT MARINE ACT OF 1920 597 

energy and initiative to maintain their position, and must be met in 
the same way. 

"Nations are not free that depend upon foreign fleets to carry 
their products and bring to them their supplies. The peace of the 
world is not secure so long as one nation wholly dominates the ocean 
trade. We do not seek to drive other nations from the sea. We 
do not seek to dominate ocean trade. But we do seek to do a 
just and proper part of it, and especially of our own. If we can not 
attain this end now we never can do it. No halting, hesitating, doubt- 
ing policy will succeed. We must take risks. We must encourage 
our capital and energy to go into this contest and assure them that 
we are behind them to build up and sustain rather than tear down. 
With this assurance no one can doubt our success." 

Current opinion on new shipping law. — Any law con- 
ceived in a spirit such as this is bound to have warm 
friends as well as bitter enemies, both at home and 
abroad. Two quotations picked at random from current 
publications reveal the wide discrepancy which marks 
domestic opinion on the new shipping law : 

The New York Journal of Commerce said : The legisla- 
tion is against the spirit of the times, opposed to all 
sound, economic doctrine, and essentially inequitable. It 
must, therefore, be a failure in the broadest sense of the 
term. Americans can feel only regret at having to admit 
the concluding statement of Mr. Jones' demesne in which 
he says that this "is an American act." It is more nearly 
modeled upon the lines of Prussian protectionism as ex- 
hibited in Germany before the war." 

The New York Sun and Herald said : "The greatest boon 
to American shipping in three-quarters of a century is 
the Jones bill just signed by the President." 

But the merchant marine law affects all maritime 
nations and therefore extends into the field of inter- 
national politics, and that at a time when the material 



598 OCEAN SHIPPING 

world is in chaos and mankind in a state of nervous ex- 
citability. It was not surprising therefore to find the 
State Department entering vigorous protests against 
those parts of the new law which refer to matters where 
the interests of the United States and those of other 
countries are apt to clash as a result of the new situation 
created by the war and reinforced by the provisions of 
the Jones Bill. In our discussion of the Law, we shall 
point out those features which are particularly apt to 
cause resentment or increase friction in our intercourse 
with foreign nations. Great Britain and Japan, as the 
nations whose interests are more deeply affected by 
America's bid for a just share of the sea-borne trade of 
the world, were the first to indicate their disapproval. 
Mr. Lloyd George promptly declared in Parliament his 
intention of protesting against the American Shipping 
Law, and from Tokio, the cable announces that Japan 
likewise will protest against the Jones Bill, especially 
with regard to its relation to the shipping of the Philip- 
pines. The protest, according to the Hochi Shimbun, a 
Japanese newspaper, will be made on the ground that the 
measure is a discriminatory violation of the Japanese- 
American commercial treaty, and represents a blow to 
Japanese shipping.* 

Detailed provisions of the Act, Section 1 and 2 intro- 
ductory. — We shall now take up the 39 sections of the 
new law, state the contents of each section, and discuss 
wherever necessary the meaning and portent of the pro- 
visions of the Act. 

Section 1 announces the determination of Congress 
"to do whatever may be necessary to develop and en- 

^ See Nautical Gazette, June 12, 1920, p. 883. 



THE MERCHANT MARINE ACT OF 1920 599 

courage the maintenance of a merchant marine of the 
best equipped and most suitable types of vessels sufi5- 
cient to carry the greater portion of the country's com- 
merce and serve as a naval or military auxiliary in time 
of war or national emergency, ultimately to be owned 
and operated privately by citizens of the United States." 

Section 2 puts an end to Government shipbuilding, per- 
mitting only the completion of the building now under 
way. It contains several amendments to various Emergency 
Shipping Acts. 

Section 3 creates new Shipping Board. — Section 3 rep- 
resents a far-reaching modification of Section 3 of "The 
Shipping Act, 1916" which created the original Shipping 
Board. The number of Commissioners is increased from 
five to seven ; their salary is raised from $7,500 to $12,000. 
The number was enlarged so as to render it possible that 
every section of the country be represented on the Board 
in a way which will do justice to the maritime interest 
of the different parts of the United States. The dis- 
tribution is as follows: 

Pacific Ocean States 2 

Atlantic Ocean States 2 

Gulf of Mexico States 1 

Great Lakes States 1 

Interior States 1 

Total for all States 7 

Not more than four members of the Board may be of 
the same political faith. 

Section 4 turns the vessels and other property acquired 
through the President, over to the Shipping Board. This 
refers primarily to the ex-enemy vessels, but vessels in 
military or naval service are excepted. 



600 OCEAN SHIPPING 

The new sales policy. — Section 5 gives the Shipping 
Board power to sell at its own discretion, subject, how- 
ever, to certain conditions, the ships to which the Board 
holds title. In this portion of the Act, the Senate made 
very extensive and important changes of the Greene 
Bill, which was the House measure underlying the 
Jones Bill. It is apparent from Mr. Greene's Report,' 
that he was largely influenced by the fear of a marked 
drop in freight and tonnage values to be expected in 
the near future. He was willing to have the Government 
shoulder a very considerable loss from the sale of the 
ships. The Senate, on the other hand, emphasized the 
fact that the ships are the people's property and that 
therefore they should not be sold at bargain prices merely 
to get rid of them and into private hands as quickly as 
possible. Besides, the lengthy hearing held by the Sen- 
ate Committee on Commerce forcefully brought out the 
fact that, even if the Government were willing to sell 
the approximately 13 million D. W. tons of ships at a 
considerable loss, the sale of such an enormous amount 
of tonnage could hardly be financed, unless it were to be 
spread over a fairly long period. In general, the Shipping 
Board is instructed to let itself be guided by the same 
principles which a prudent and solvent business man 
would consider under like circumstances. The Senate 
had fixed a minimum price by the provision: "no sale 
shall be made at a less price than the cost at the time 
of making such sale of constructing vessels of similar 
types in private yards in the United States, after deduct- 
ing the depreciation charge against the vessels sold and 
generally allowed in shipping operations." But the 
House members insisted upon modification and an 
^ House Report No. 443, p. 2. 



THE MERCHANT MARINE ACT OF 1920 .601 

eleventh-hour change in the Act stipulates that the 
Shipping Board shall offer Government-owned vessels for 
sale on a competitive basis. The price at which the 
Shipping Board's vessels will be sold to private owners 
will largely determine the ability of American carriers 
to compete with their foreign rivals, whose ship values 
have to a considerable extent been written off. Their 
fleets in most cases consist partly of older vessels wholly 
written off and partly of newer vessels. On an average 
these foreign fleets therefore represent a fairly low book 
value when compared with that of some American com- 
panies, all of whose ships are new, i.e., built since the war. 

Criticism of this policy. — Some people find fault with 
this section because it gives the Shipping Board too 
much free rein. They read between the lines that what 
the Government really wants is to stay in the shipping 
business for an indefinite period. But those who take 
the time and trouble to read thoroughly the volume of 
hearings before the above-mentioned Congressional Com- 
mittee can hardly help being impressed with the honesty 
and competence of the particular lawmakers responsible 
for this Act, and destructive criticism of this important 
piece of legislation such as is found in some papers,' 
seems both unjust and impolitic. To be sure, much will 
depend on the caliber of the men who will make up the 
enlarged Shipping Board. 

Sale of shipping Board vessels to aliens made very 
difficult. — Section 6 permits the Board to sell Government 
vessels to aliens if a sale cannot be made to Americans. 
The affirmative vote of five of the seven members of the 
Board is required in passing upon each case. Additional 

1 See, e.g., Export Trade and Exporters^ Review, June 19, 1920, 
p. 22. 



602 OCEAN SHIPPING 

restrictions contained in provisions which were to limit 
the sale of ships to aliens to vessels below a certain size 
and above a certain age, were stricken out. 

Section 7 instructs the Board to establish needed new 
steamship services by sale or charter of government 
vessels. Thus most of the ex-enemy vessels were 
allocated to the recently organized United States Mail 
Steamship Company, to ply on specific routes. The sec- 
tion furthermore authorizes the Post Office Department 
to grant mail contracts and to give preference to Ameri- 
can ships in doing so. 

Nation-wide inquiry into traffic conditions authorized. 
— Section 8 charges the Board to investigate transporta- 
tion and traffic conditions prevailing in the hinterland 
of the important ports of the country, suggest improve- 
ments and co-operate with the Interstate Commerce 
Commission in order to remedy congestion and other 
evils marking the after-war status of our transportation 
system. 

Section 9 stipulates that marine insurance must be 
carried on ships sold by the Board on deferred payments. 
The Government naturally wants to protect its equity. 

Section 10 authorizes the Shipping Board to establish 
its own insurance fund to cover ships or other property 
of the Board. 

Aid to shipbuilding. — Section 11 is a provision under 
which it is hoped new and up-to-date ships will be built 
to round up the war-constructed fleet. A revolving 
fund of $25,000,000 a year may be set aside out of rev- 
enues from sales and operation for a period of five years 
to lend to American citizens who desire to build ships, 
the loan not to exceed two-thirds of the value of such ship 
or ships. 



THE MERCHANT MARINE ACT OF 1920 603 

Section 12 permits the Shipping Board to recondition 
the ex-enemy vessels. However, recent events show that 
the Board intends to make little use of this permission. 
When the Shipping Board proposed to recondition the 
ex-Vaterland, now the Leviathan, the lowest estimate 
for this undertaking of unparalleled proportions was in 
excess of $9,000,000 and 500 days. The Board therefore 
decided to dispose of the vessel "as is" to private inter- 
ests, leaving to the buyer the task of reconditioning. A 
similar policy was pursued regarding most of the ex- 
German ships. When they were chartered to the United 
States Mail Steamship Company, the arrangement was 
that the contracting company bear the cost of recondi- 
tioning. 

Section 13 authorized the sale of other property owned 
by the Board. 

Section 14 provides for the transfer of excess revenues 
of the Board to the Treasury. 

• Section IS exempts the War Department from the pay- 
ment of charter money on Shipping Board vessels used 
during the war with Germany. 

Section 16 terminates the authorization given the 
Board during the war for constructing houses, build- 
ings, etc. 

Section 17 transfers the control over docks, piers, ware- 
houses, wharves and terminal equipment and facilities